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Mike Haynes

Capitalism in Marx’s time and ours

(Spring 1983)

From International Socialism 2 : 19, Spring 1983, pp. 49–84.
Transcribed by Christian Høgsbjerg.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Karl Marx was born on the 5th of May 1818 in the small German town of Trier. 65 years later he died on 14 March 1883 in London – the hub of nineteenth century capitalism. In those intervening six and a half decades the face of much of the world had been more radically changed than at any previous time in history. The measures we have of this transformation are all inadequate to the task of capturing its full extent. Nevertheless we must make of them what we can. One such crude indicator is that of the growth of total output. If we look at Europe as a whole between 1818–1883 we find that total output grew by 2.5 times. Of course the population of Europe also increased in these years but even so output per head rose some 1.7 times. If we focus particularly on the early industrialising countries where Marx spent much of his life (our statistics define these as the United Kingdom, France, Belgium and Switzerland) then the increases are even more significant. Total output in these countries rose some 3.3 times during Marx’s lifetime and output per head 2.3 times. [1]

Such figures only have real meaning if we can compare them with what went before. Unfortunately this is not possible with any precision – the basis of our statistics is already weak enough for Marx’s lifetime without pushing them back into earlier centuries. But by a simple trick we can gain an idea of just how revolutionary these rates of grow were. Suppose we extrapolate backwards the rates of increase between 1818–1883 to the years before Marx’s birth? Within a matter of decades we quickly arrive at such low levels of output per head that life would have been difficult to sustain. The system then could never have sustained growth as fast as this. In fact our trick enables us to go one step further and say that the increase in output per head in the early industrialised countries during Marx’s lifetime was probably greater than the increase in output per head in the previous 2,000 years and possibly even the whole of recorded human history. [2]

No-one was more aware of this than Marx himself though of course he could not put any precise figures to the growth of capitalism. From the beginning of his attempt to understand its development he stressed that capitalism was the most dynamic mode of production that had yet been seen. This dynamism took a number of forms. At one level capitalism piled up huge concentrations of wealth in a way that had never before been possible. At another level it spread itself ever more widely across the face of the globe tying in the world’s population to its motive force. But the dynamic of capitalism for Marx was not simply quantitative. Capitalism could only develop by constant transformation. At first it was the old relations that were dissolved as the restrictive barriers that had limited human potential were destroyed. But the transformation did not stop there for then capitalism proceeded to constantly revolutionise itself as it pushed production forward and constantly broke down the earlier forms that it had created.

The sense of this dynamism comes out clearly in the famous first part of the Communist Manifesto:

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together ...

The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.

Capitalism, continued Marx and Engels was, ‘like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells’.

Everyone who reads this and other passages in the Communist Manifesto is impressed both by the outrage in the condemnation of capitalism and the analysis that accompanies it. But it is difficult also not to be impressed by the awe that Marx and Engels obviously have the stupendous nature of capitalism’s achievements. It was an awe that was the product of living in a society in which for the first time growth and change had become the normal condition. And it was a sense of achievement that Marx and Engels fully shared with the bourgeoisie itself.

Discussed at this level, however, it is too easy to see the development of capitalism in Marx’s time as a simple success story. And unfortunately this is just how much historical work including that of some leading Marxist historians portrays it. The old crumbles and gives way before the new save only for the heroic resistance of various groups of peasants and workers. Real interest then comes to centre on the original rise of capitalism and its later ‘take-off’ in the era of the industrial revolution. The ‘drive to capitalist maturity’ that occupied Marx’s lifetime and beyond for the advanced capitalist countries appears largely as an afterthought in which immanent tendencies of development naturally work themselves out until we finally arrive at the relative complexity of the present day. In its turn Marx’s own analysis of capitalism can then be pictured as a magnificent distillation of these immanent tendencies, a splendid theoretical edifice in which the structure of the capitalist mode of production is laid out before us. It is not, of course, a complete distillation – there is room for theoretical debate on this and that issue – but the logical structure is there and all that is necessary for historians is to apply it to history.

This approach, we shall argue, rests upon a serious misunderstanding both of the actual history of capitalism and the nature of Marx’s method in the Grundrisse and Capital. The pattern of capitalist development has never been a simple realisation of immanent tendencies and it was certainly not so in Marx’s day. On the contrary, capitalism always presents us with a series of highly complex, concrete, but changing forms. The analysis of capitalism therefore must consist of much more than simply identifying the pattern of development in what appears at any one time to be the most modern or the most typical forms and then constructing an analysis around them. Equally we cannot simply apply a pre-ordained theoretical structure to the real complexity of capitalism as it exists rather than as it is supposed to exist. Instead what we need is a method by which we can understand the relationship between the general nature of the capitalist mode of production and the various concrete forms that it has historically given rise to.

To see why this is so and how such an approach differs from what often passes as the Marxist analysis of capitalism we need to begin by looking more carefully at capitalism in Marx’s time and the very complex forms its expansion took. To do this we will concentrate on the capitalist forms that Marx knew best – those of Britain. From this basis we will then be able to see more clearly the problem that Marx had to deal with and it will then be possible to look anew at his method in the Grundrisse and Capital and to show why a proper understanding of that method is equally essential to an understanding of capitalism in our time.

Factory industry in Marx’s time

The first thing that needs to be said is that even in those areas where capitalism most resembled the forms that we take for granted today (particularly, cotton, iron and steel and engineering) these forms were still relatively undeveloped. This point is now more widely commented upon by historians but the extent of the transformation that took place at the end of the nineteenth century i.e. in the three decades after Marx’s death is still not appreciated. In fact, as W.H.B. Court noted some years ago, ‘mid-Victorian England [the background against which Marx wrote CapitalMH] was nearer to Matthew Boulton and his partner James Watt than to the men and methods of 1914’. [3]

The significance of this can be seen across a whole series of areas. The size of capital, for example, was still very small. No easily comparable figures exist on the size of either firms or factories. Nevertheless the scattered data that we do have show that capital in Marx’s time in England was small scale. We know from factory inspectorate returns that the average size of manufacturing establishments was less than 20 employees in 1871. Such averages across the whole of manufacturing can, of course, be misleading weigh down as they are by the numerous small plants. Ideally we would like to know median sizes rather than simple averages but no-one has yet attempted such calculations. Nevertheless there is a degree of consistency between the average size revealed by the statistics for the advanced sectors and what we know of company size from the study of individual firms. Big units did exist but the degree of variation around the mean was limited. [4] The biggest plants were to be found in shipbuilding (as they had always been in history until then). The average number employed in these yards varied between 600–800 depending upon the area. In South Wales the largest iron works averaged some 650 workers but the national average was down to 200. In engineering the average number of workers was less than 100 and in cotton it was about 170. By the time of Marx’s death little had changed. ‘There is no reason to think that there that there was any important change in the scale of industrial operations’, commented J.H. Clapham, of the period between 1871 and the early 1880’s. Anything resembling the large modern factory unit was therefore a relative rarity in Britain during Marx’s lifetime. [5]

Similarly the concentration and centralisation of capital had hardly begun. Examples of vertical integration backwards and forwards to take over different stages in the productive process can be found, as can examples of horizontal integration outwards to take over rival units at the same stage of production. But these examples too are relatively rare and hardly typical of mid-Victorian industry. Conglomeration – the drawing together of different lines of production under the umbrella of one unit of capital was virtually non-existent. Factory size was therefore a good guide to the actual size of capital itself. Indeed in some industries like weaving it actually overstated it since factory buildings might well be shared by different firms.

This embryonic development of the centralisation and concentration of capital was closely related to the equally embryonic development of the organisational form of capital. It was only in the 1850s and 60s in western Europe that legislation permitting joint stock organisation was passed. In Britain the necessary legislation came between 1856–62. However the opportunities created by this legislation were comparatively slowly taken up. In 1885, two years after Marx’s death, it is estimated that only between 5–10% of companies were limited and these were concentrated in shipping, iron and steel and cotton. The family business remained the norm and most joint-stock companies were simply family firms taking advantage of the legislation rather than modern management controlled units with a mass of ‘impotent’ shareholders. Marx, therefore, developed much of his analysis against the background of the ‘heroic age of the private owner of risk capital’. [6] In these terms it is not surprising that although he stresses the danger of confusing capitalist relations with the control of individual capitalists he should nevertheless write as if in practice these relations were personified or embodied in the individual owner capitalist. Charles Dickens may have exaggerated when he developed his portrayal of Mr. Gradgrind in Hard Times as the quintessential capitalist but the Victorians and Marx would have recognised in him the capitalists they saw around them.

Equally the years between the 1850s and the late 1870s were also the time when changes in price had their sharpest impact on the restructuring of capital. The relatively small scale of business combined with falling transport costs gave price competition a competitive edge that it had not had before and would not have again. This was not, of course, a competition that even then bore any resemblance to the ‘perfect competition models’ of modern economic textbooks. But it did mean that Marx’s experience of ‘monopoly capital’ was highly restricted and unrepresentative of what was to come. (One of the few more blatant examples of monopoly that Marx might well have encountered as a member of the mid-Victorian middle class was when he did his weekly shopping! The Victorian middle classes were much concerned that the existing stores overcharged them and sold them adulterated food. Moreover since they offered long credit their customers could find themselves tied by debt and so unable to shop around. In the late 1860s and 1870s this dissatisfaction led to the creation of middle class ‘co-ops’ like the Civil Service and Army and Navy Stores!)

Much of this picture of the structure of capital in the more advanced sectors began to change from the late 1880s. Capital began to take advantage of the joint-stock form as a convenient shell for its expansion. In the 1890s and early 1900s there was much more rapid development of the company form and a related burst of amalgamation that fundamentally altered the structure of capital and the nature of capitalist competition. It is probably true that by 1914 this had developed less far in Britain than in the United States but even so the picture in 1914 is strikingly different from at the time of Marx’s death. For the economy as a whole the number of registered limited companies increased seven times from 9,334 in 1885 to 62,762 in 1914. [7] During the same period paid up capital increased some five times to about £2,500 million. Of these companies in 1914 only some 14,000 were public companies but this 27% of all companies clearly covered the biggest capitals and the largest employers of labour which had not been the case in 1885. Unfortunately it is not possible to say with precision how big the public companies were relatively because the statistics did not distinguish private companies from public in any adequate way until 1926. In that year, though, the much smaller number of public companies had twice the capitalisation of private companies. It also seems likely, if the post war data is not too distorted a guide, that this type of capital was much more profitable. In the immediate aftermath of the war public companies were estimated to be making 57% of all company profit. [8]

One industry where we can trace the transformation relatively clearly is the Lancashire textile industry to which Marx had originally devoted so much attention. Table 1 shows the lack of development of joint stock organisation in 1884. Joint stock companies were few and by no means larger on average than unincorporated and private companies that were under clear family control. By 1911, albeit at different rates in different parts of the industry, the picture had changed quite dramatically. Now joint-stock companies dominated the industry in a much more recognisably modern form and they were also the forms with the largest number of spindles and looms. It is also clear from the data that there had been a significant increase in the size of firms (measured by the changing averages for the numbers of spindles and looms).

Table 1

Changes in the Structure of Capital in the Lancashire Textile Industry 1884–1911 [9]




of Firm

% Firms

Average no. (000s)

% Firms

Average no. (000s)





Spinning only








Family J/S





Joint Stock





Doubling only (b)








Family J/S




Joint Stock





Weaving only








Family J/S





Joint Stock





Firms Weaving and Spinning








Family J/S







Joint Stock







All Firms






Family J/S



Joint Stock



a. because of round not all percentages sum to 100.
b. doubling is the twisting of the yarn together.

Looked at across the whole economy the transformation was more varied. Some sectors like services lagged far behind but in others both the take-up of joint-stock forms and the concentration and centralisation of capital had proceeded much farther. This was particularly clear in the crucial banking sector. In 1880 there had been some 240 private banks and only half that number of joint-stock banks, each with few branches. By 1913 there were only a dozen or so private banks left. The number of joint-stock banks had also declined by two thirds to 40. And within this latter total the emergence of a small number of giant banks was already obvious, in the next four years of war these were to build their power even more fading to the creation of the ‘big five’ that were to dominate financial capital in the British economy for the next half century. Beyond this it is also possible to clearly identify a significant trend towards the internationalisation of manufacturing capital. At the time of Marx’s death the multi-national company had been barely noticeable but by 1914 60 firms had significant overseas manufacturing subsidiaries and of the leading manufacturing firms in 1970 at least 14 had gone multinational before the first world war. [10]

The significance of all this is that although Marx was able to identify the tendency within capitalism for capital to centralise and concentrate it was not a reality around him except in the most attenuated forms. He was, therefore, ignorant – except in the most general terms – of the forms that these tendencies would take after his death. The development of the modern forms of capital was a relatively slow process and it is dangerously misleading to read them back into mid-Victorian Britain. The legislation of Marx’s day may have made big business possible but ‘it was thirty years before the combination movement made it a reality’. [11] This was at least a decade after Marx’s death and some three decades after he had done his investigatory work for Capital. Even Engels who outlived Marx by a dozen years could only begin to catch a sense of the changes that were to come and of their significance.

Non-factory capital

But the development of capitalism in Marx’s time was complex in other ways too. It was not simply that modern factory based capital emerged slowly but that the overall pattern of development had nuances of its own. In recent years historians have begun to investigate the nature of the transformation of the labour process more closely and this has made them more aware of the great variation in the forms taken by the expansion of capital. Even in industries like textiles, iron and steel and engineering mechanisation did not follow any simple pattern. The Victorian factory still depended heavily on the brute force of manual labour as an essential ancillary force to the machine. But even by the time of Marx’s death these factories still did not dominate employment and at the time that he was writing Capital they employed less than a fifth of the labour force.

What forms then existed in the rest of the economy? Raphael Samuel has recently catalogued at some length the large number of industries in mid-Victorian Britain that depended upon traditional processes based on hand labour that had been relatively untransformed by industrialisation. [12] These industries were in no sense marginal for they still accounted in the 1850s for much the larger part of industrial output. Moreover, as we shall see, they were just much at the centre of the expansion of capitalism as the better known cotton industry.

Perhaps the single most important industry that expanded without transformation of the labour process by mechanisation was the industry. Mechanisation on the surface did have some impact in the nineteenth century but underground work was much the same at the end of the century as it had been at the beginning. Yet by 1914 the coal industry produced 7% of GNP and exported some 73 million tons. This was only possible because the industry had expanded on ‘extensive’ lines by employing more labour rather than by undergoing a technological transformation. In fact labour productivity in mining began to decline in the 1880s but thanks to the continued increase in the labour force (940,000 in 1907) coal owners were able to push up output. In 1913 only 8.5% of coal was cut mechanically and a significantly smaller proportion conveyed mechanically. But this was an average of all the fields. In fact mechanisation had proceeded unevenly and gone furthest in Scotland and Yorkshire. In other areas its advance was significantly less. [13] In south Wales, for example, more than a quarter of a million miners worked with picks to hew out what Gwyn Williams has called ‘the gigantic world Empire of south Wales coal ... a heartland of British imperial capitalism’. The expansion of the industry there was dependent on the continued movement of workers into south Wales which developed to such an extent that ‘in the early years of the twentieth century south Wales saw immigration of an intensity second only to U.S.A.’ [14]

The sheer scale of the coal industry made it untypical in a number of respects of the type of industries we are interested in here. [15] More typical were the so-called ‘Midland trades’ which dominated the Birmingham area – hand made nails, chains, nuts and bolts, ironmongery, small arms, jewellery, and the brass and copper trades to name only the most important. Here, to quote Court, one of their leading historians, one found ‘great employers of men, women and children at forges attached to the cottages in which they lived. At most, the industry might rise to the dignity of a small shop with assistants run by a garret-master.’ [16] Control of the industries could, however, be more complex with many of these cottages workers tied together under the thumb of wealthy and powerful merchant capitalists. The ‘rise of the Midland Industries’ can be raced back to the sixteenth century from when they began to develop a dominance in the area that lasted three centuries. Moreover it was a dominance which, like coal elsewhere, was tied intimately to the growing world role of British capital. It was only in the late 1870s and 1880s that the modern industrial structure of the area began to develop centred on light engineering, food processing (Cadbury’s), the bicycle industry, rubber and cars – ‘turning out new products, making more use of power and machinery and complicated techniques, organized on a joint stock basis and sometimes upon a very large scale’. [17]

But this type of production dominated more widely and hung on more tenaciously in still other industries. It can be found in food processing, pottery, glass, leather, woodworking, metallurgy and some engineering production. Similarly it dominated much of the building industry as to an extent it continues to do so today. It was even an important part of the history of East Lancashire – ‘the home of the greatest concentration of manufacturing industry that the world had ever known’. There cotton never employed more than a third of the population in the towns and many of the related and ancillary trades continued to be traditionally organised throughout the nineteenth century. Even in textiles ‘domestic industry expanded side by side with the factory until the 1830s and experienced a renaissance with the spread of the sewing machine in the 1860s and of the knitting machine in the 1880’s. [18]

To understand this form of development and why it was so; important a part of the general expansion of capital in nineteenth century Britain (and for some industries beyond this) it is important to use the distinction that Marx drew between the formal subordination of labour and the real subordination of labour under capitalism. (Strangely Raphael Samuel ignores both this distinction and Marx’s own substantive discussion of it.)

Marx used the term capitalist mode of production in two quite distinct senses. The first and most significant referred to the domination of production and society at large by the self-expansive power of capital. The second sense referred specifically and more narrowly to the labour process itself. Here Marx writes of modern large-scale factory industry dominated by machinery as ‘the specifically capitalist mode of production in its developed form’. A failure to distinguish between these two senses has led to much confusion amongst Marxists.

Capitalism in the wider sense of a mode of production distinct from feudalism began to emerge in the sixteenth century. But it did so by subordinating the existing labour process to the imperatives of the expansion of capital without actually transforming the internal nature of that labour process. Classically, domestic or cottage industry was tied into a network of merchant control and the real independence of workers was lost as production as a whole was subordinated to the laws of motion of capitalism. This was what Marx called ‘the formal subsumption of labour under capital’. It was only in the nineteenth century with the development of machinery that capitalist domination could develop through the internal transformation of the labour process. It was this process that Marx analysed as the ‘real subordination of labour’. [19]

From our discussion of the characteristics of British capital it can now be seen that not only did the formal subordination precede the development of the real but during Marx’s lifetime forms of capital embodying the formal subordination continued not only to exist but to grow and develop apace. In other words in examining the actual development of capitalist forms we have to drop the notion that the shift to new forms embodying the real subordination of labour was automatic. Even if we leave aside the now well documented resistance of workers themselves to this shift it is clear that capital itself found it more profitable to expand by developing the old methods than adopting the new across a wide range of industry. Indeed during Marx’s lifetime these forms not only developed alongside modern industry but in an intimate relationship to it. Thus one historian of sweated labour in outwork notes ‘the amazing persistence – even vitality – of this antique “system” in the nineteenth century’. Even by the time of Marx’s death this vitality was still very real:

Although by then [the last quarter of the century – MH] it had virtually disappeared from some areas where it had traditionally been important, it had taken a firmer root in others; and although no major industry now existed exclusively on the basis of outwork organisation, many were carried on by some complicated combination of factory production and outwork, with the two effectively complementing each other. [20]

There exists therefore a complex process of interaction in operation here that needs to be understood if we are to analyse the nature of capitalist development.

Precisely because production based upon the formal subordination of labour continued to grow alongside the modern factory and in direct connection with it we cannot analyse its development in terms of a crude dichotomy between pre-modern/modem forms or pre-industrial/industrial forms. Both forms of development were modern and industrial in the sense that their particular dynamics both derived from and were tied together by the same general logic of capitalist development. As a consequence there arose a specific and differentiated pattern of development where for many industries and localities the consequence of the industrial revolution was ‘to accentuate pre-industrial characteristics’ and create ‘industrialisation without industrialisation’.

This accentuation of the pre-industrial character took two related forms. One was a major expansion of employment in these traditional industries. This can easily be traced in the occupational census where alongside the expected increase in employment in factory based industry one finds a significant growth too in non-factory industry. [21] It can also be traced in the history of many manufacturing towns where these industries continued to dominate late into the century. [22] But perhaps its best known consequence can be traced in London where, as Gareth Stedman-Jones has so graphically described it, a massive pool of casual labour flowed in and out of trades like furniture and clothing as well as service industries like transport and the docks. [23] But this accentuation of pre-industrial employment patterns did not leave the labour process itself untouched. On the contrary, it produced a massive degradation of labour within the traditional labour process of which ‘sweating’ was the most obvious form. In this way in spite of formally owning certain of the means of production and in spite of a formal control over their means off subsistence workers found that ‘these conditions of labour (were being) mobilised against them’. The more effectively, continued Marx, ‘the formal relationship between capital and wage labour is established (then) the more effectively the formal subsumption of labour under capital is accomplished ...’

The ‘logic of capitalist expansion’

What then underlay this pattern? The forces sustaining each specific instance of expansion on the basis of the formal subordination of labour must be examined separately. But it is possible to offer some wider generalisations. Some commentators have suggested that these forms developed alongside the factory because of an under-accumulation of capital associated with the early stages of capitalist development. But the theory behind this is only a variation on the pre-modern/modern dichotomy and the basic suggestion is that as capital is accumulated these will die away. As such it fails to explain the very vitality of these forms over the long period. Moreover there is no evidence to show that capital was actually a limiting factor causing capitalists to adopt and perpetuate these forms. [24] Indeed large amounts of capital could be and were invested in these industries though not necessarily in the labour process and there was certainly no shortage of capital accumulated there out of the efforts of the workers.

Another similarly inadequate attempt at explanation is that which stresses the limitation of technique – these industries developed in this way because an adequate factory technology was not yet available. But this only begs the question of why in these industries an adequate factory technology was slow in coming. It also fails to explain why when that technology did become available the take-up of the factory form was so slow and expansion through the formal subordination of labour so resilient. What tends to lie behind this argument is a technological determinism which both assumes the superiority of factory technology in terms of efficiency and that such superiority is a sufficient explanation. But, as Stephen Marglin has powerfully argued, the factory is a social institution and not just a technological form. Therefore one cannot discuss the shift to the factory in terms of an abstract technological efficiency. In fact, as he suggests for the very first factories in the eighteenth century:

the key to the success of the factory, as well as its inspiration, was the substitution of capitalists’ for workers’ control of the productive process; discipline and supervision could and did reduce costs without being technologically superior.

Only later, once the factory form was in place, did an appropriate technology develop. [25]

In other words two related issues are crucial in analysing the shift to the factory. First is the size of the surplus that could be generated by a particular labour process, then, secondly there is the problem of controlling the worker in that process and the costs this involved. That the shift was not more universal therefore depended not only on technology but the ability of these traditional forms to generate sufficient surpluses to survive and because the problems of controlling the labour force did not increase to a level where the close supervision of factory labour became necessary.

What lay behind both of these features was the availability of a mass of malleable cheap labour. This meant that capital could expand not by increasing relative surplus value but by driving down labour costs to increase the amount of absolute surplus value produced. In this way these forms could not only cling tenaciously to life but expand. The fact that this involved a degree of self-exploitation only added to its attraction for capital so long as the resistance of workers (slower work, poor quality production, etc.) did not threaten the size of the surplus. But with a huge pool of labour available and wretched earnings, those who controlled the industries had the upper hand. Moreover, the system also meant that many of the ‘costs’ that would have accrued to capital could now be passed on to the shoulders of the workers themselves or, less directly, on society in general through charity and poor relief. This is especially useful wherever trade had a seasonal character. In this sense capitalism created a dynamic where the increasing spread this type of industry as well as agricultural development led to Population growth which in its turn then perpetuated and gave life this particular form of capitalist expansion rather than factory based technology. [26]

We do have available one valuable indicator that goes a long way towards crystallising what we have been saying about both the protracted development of modern capitalist forms and the way in which the actual pattern of capitalist expansion assumed complex forms. This is the extent of steam power utilisation in industry. It is not a perfect indicator of the extent and modernity of modem capitalist forms since water power was the major source of factory power for much of the first half of the century. But certainly for the latter half of the nineteenth century the index of steam power use goes a long way towards capturing both the extent and character of capitalist development. This is shown in the table below:

Table 2

Steam Power in U.K. Industry














It is clear from the table that in 1870 less than one million horse power existed in industry (at this time water power supplied a further 55,000 h.p.). Moreover, of this figure some 300,000 h.p. was accounted for by the cotton industry alone and just over 500,000 h.p. by the whole of the textile industry. Since blast furnaces and iron mills accounted for a further 220,000 h.p. the major part of the remaining industries must have been without significant steam power utilisation. In these terms Marx’s early aphorism that the hand mill gives you feudalism while the steam mill gives you capitalism should obviously not be taken too seriously. [28]

By 1880 the amount of steam power had more than doubled but the really big surge in the use of steam power (and by implication power driven machinery) came between 1880 and 1907 – in the decades after Marx’s death. Moreover, by the latter date electrical power had begun to be important (in 1912 it supplied a quarter of motive power) so that the actual increase in the use of power driven machinery was actually greater. Thus we can see that at the time that Marx was preparing Capital power driven machinery had hardly begun to touch large sections of British industry and even when he died two decades later the technological transformation for the larger part of the economy was still to come.

Crisis, state and world economy

So far we have concentrated our attention on the structure of individual capital but the distinctiveness of the system in Marx’s time can also be explored in other ways. Two in particular need comment here. The first is that the process of the expansion of capital at large was then, as it is now, through crisis. But the form of periodic crisis in Marx’s time was significantly different both from today and what it was beginning to become after his death. As Court comments in his general history:

The classical period of the trade cycle, so far as Great Britain was concerned ... undoubtedly fell within the century between the crisis of 1763 and the country bankers crisis of 1866. [29]

In other words it formed the background to Marx’s own discussion of the mechanism of capitalist crisis.

In his reference to the ‘classical trade cycle’ Court has in mind three features of the crisis mechanism at this time. Firstly, as we have already noted, the size of capital was small and this made it more vulnerable. Secondly, the banking system was weakly developed and insecure and dependent to an extent on a Bank of England that had yet to fully take on the functions of a modern central bank. Thirdly, the state itself did not intervene in the crisis. Taken together these features meant that from the point of view of the system as a whole the restructuring of capital through crisis was a relatively automatic process. Crisis was precipitated by a banking panic which would lead to the destruction of weaker capitals and a redistribution of capital to areas of higher profits. Manufacturers in certain trades and localities might try to organise themselves to resist the full impact of the crisis but their efforts were generally limited and unsuccessful.

By the end of the nineteenth century, however, the crisis mechanism was beginning to be the subject of more conscious manipulation. Under the ‘Gold Standard’ there remained no significant role for the government in a crisis and serious state attempts at the mediation of crisis in Britain had to await the final retreat from gold in 1931. But even the gold standard had to be administered and this placed the Bank of England at the centre of the process – a responsibility which from the 1860’s it was much more prepared to accept. Equally the rise of larger business units also began to introduce modifications into the working of crisis. The consequence was that the apparently automatic restructuring of capital began to be the subject of more conscious attempts at interference and manipulation. Prior to 1914 the impact of these attempts at mediating the crisis for British capital as a whole and world capital was hardly perceptible. But a process had been set in motion whereby it would become more significant and so the crisis mechanism of capitalism would come to incorporate a whole series of crucial features not apparent in Marx’s time.

These later developments cannot, of course, be understood without reference to the state which is the final characteristic of British capital in Marx’s time that we need to raise here. During Marx’s lifetime the British state played an essential role in creating the general political and economic conditions for the reproduction of capital. But its direct role in the process of accumulation and production was limited though not to the extent that some of the more naive ‘laissez-faire’ histories suggest. The state was, for example, and always has been the single largest capital in any advanced country. Nevertheless in Britain in Marx’s time this aspect of its activity did not stand to the fore. From the 1820’s to the 1870’s state expenditure in money terms was constant and as a percentage of GNP it actually fell to a low of about 8%. To give some idea of the comparative significance of this – the value of all state expenditure during this time was roughly on a par with the value of the output of the cotton industry.

Consequently one of the major and most distinctive features of modern capitalism was missing from Marx’s experience. It is not surprising, therefore, that while the state figures prominently in Marx’s general political analysis it only appears intermittently as an economic force in the Grundrisse and Capital. Yet by the 1880’s we can already, with only a limited need for hindsight, begin to see the significance of this omission. It was then that the liberal Sir William Harcourt coined the phrase ‘we are all socialists now’ to capture the way in which a more general rise in the level of state activity had begun. The Economist put it more picturesquely in 1895 when it wrote that ‘little by little and year by year, the fabric of state expenditure is built up like a coral island, cell on cell’. By 1914 state expenditure had increased from the time of Marx’s death by a third to take 12.5% of GNP. The growth of defence and welfare spending had contributed to this but so had a ‘spectacular’ growth of municipal trading which was to lay the basis for much later nationalisation. Then during the first world war it shot temporarily to 50% of GNP as by 1918 the state had brought thousands of factories and workshops and millions of workers under its control. When the economy demobilised after 1918 it was to a plateau of state activity significantly higher than in 1914. [30]

We have deliberately stressed the peculiarities of British capital in Marx’s lifetime. Of course, had we cast our net more widely on a world scale those peculiarities would have been even more evident. In the United States, for example, we find in the North a labour process which was if anything more intensely based upon the real subordination of labour than that in Britain. Yet in the American South slavery, which had been a declining institution in the eighteenth century, had been given a new lease of life, indeed one might say recreated anew, from the 1790’s to feed the burgeoning demand for cotton from the textile factories of Lancashire. Not only was slavery used to work the plantations but it was even found to be an efficient form of labour organisation and control in the factories in the South. [31]

If we then turn to Europe the forms in the countries following Britain’s industrialisation here are no less varied. In Germany in the 1870’s we find the huge Krupp works at Essen with some 12,000 employees. [32] But alongside it in the German economy a mass of small workshop and artisan production that was to survive even longer than in Britain and so lay some of the social basis for fascism in the inter-war years. This pattern of uneven and combined development and forms was repeated more generally elsewhere in Europe. Here too we find also a different process of development in which the ‘weightings’ of institutions are different. In some countries it is the banks that play a leading role in organising production. In other countries that role falls to the state itself – most notably in Russia itself where the initiative for much industrialisation derived directly from the activities of the minister of finance, Count Witte, in the 1890’s. [33]

All these many forms were clearly tied to the general development of capitalism as a world economy but there has been a tendency to treat them apart. Somehow Marxists have seen them as simply less developed forms, peculiar and of restricted significance – necessary perhaps to understand the ‘development of underdevelopment’ but not to understand the ‘purer’ and uncomplicated ‘development of development’. Sometimes these peculiarities have seemed so great that the temptation has been to cut some of them out completely and treat them as being products of different modes of production. In this argument their development is related to and derives from capitalism but it is said not to be a part of any capitalist mode of production.

The advantages of our concentration on Britain is that we can now see more clearly the difficulties of any such argument, for these peculiarities were by no means restricted to ‘backward’ areas. Certainly they appear in a more intense form there but they reflect the type of peculiarities that we need to get to grips with if we are to understand capitalism in Britain – by general consent the most developed form in Marx’s time. From this basis therefore we will hopefully now be able to better understand the problem that Marx faced in trying to analyse both capitalism as a mode of production and the particular and restricted forms of it that he knew and had studied.

The problem of capitalism

Marx’s well known intention was to lay bare the ‘economic law of motion of capitalism’. But we have seen that the material he had available to him was limited by the particular stage of development that capitalism had reached in his time. Here our argument has been that, even at its most developed, capitalism was still relatively undeveloped and alongside its relatively ‘modern’ forms we find a whole series of other highly complex forms. At the same time we have argued that none of these forms were static, they were all subject to a process of change and they were, at the time of Marx’s death, about to give way to a variety of new and different forms under the impact of the expansive dynamic of capitalism.

Marx himself was completely aware of what he called the ‘permanently revolutionary’ character of capitalism. In the preface to Capital he wrote that ‘the present society is no solid crystal, but an organism capable of change, and constantly engaged in a process of change’. But if this is so how is it possible to grasp the true nature of capitalism as a dynamic mode of production? How are we to understand what ties together the many different forms that capitalism gives rise to as it develops? [34]

We can best begin to solve his problem by asking just what is meant by ‘the economic law of motion of capitalism’? Unfortunately this phrase has been repeated so many times that it has become like a religious incantation whose meaning has become obscure to even the priests themselves. Yet it actually takes us directly to the heart of the matter at issue. Marx’s starting point was his recognition that all social forms are constantly in motion and change. Writing later in Ludwig Feuerbach and the End of Classical German Philosophy Engels described this as the ‘great basic thought’ of both Marx and himself, ‘the world is not to be comprehended as a complex of ready-made things, but as a complex of processes’. If this is true in general then it must obviously be true in particular for capitalism since this is the most dynamic mode of production yet known to us. When therefore we try to unravel ‘the law of motion of capitalism’ we are concerned not with identifying static structures – not with a solid crystal – but with seeing the process which creates and operates through the different historical structures that arise as capitalism develops as a mode of production.

But this process cannot be immediately grasped from a superficial survey of the complex reality we find around us. Necessarily we need theory to understand it and our theory will have to be built upon abstractions which enable us to recreate the world in our heads. All readers will be familiar with the nature of these abstractions in Marx’s analysis – the commodity, exchange value, wage labour and so on. But in the real world these general or simple abstractions do not exist except as aspects of specific, concrete forms. These particular forms are what Marx called ‘determinations’ and the nearer we get to the real world the richer and more complex do these determinations become.

But this immediately produces a problem for us. It is clearly insufficient to just produce a list of these categories and imagine that we can build an analysis out of them. What we need to know is how the different categories all relate to one another. Are our abstractions all of equal weight or are some more important than others and, just as important, how do we decide upon our answer? We need some guide to tell us just what it is that sets the order of determination of our abstractions – what determines the determinants, what is the basis of the order of determination itself?

Marx himself did not set out this problem formally in his writings on method. In the introductory section of the Grundrisse, for example, he sets out the need to understand the world through abstraction in its successive determinations but then stops short of any more detailed discussion. But the nature of the solution is not difficult and it is immediately apparent in his actual writings on capitalism.

The crucial thing for us to understand is what keeps the system in continual movement. Here the traditional abstractions of Marxist economics are of no immediate help. The commodity, exchange value, profit, wage labour etc. do not themselves move anything, they all need to be moved by something that is itself in continual movement, that is itself a process. In capitalism it is capital in its mutual competition and self-expansion that is that process. As capital works through its circuit of self-expansion so it moves and gives life to and works through the other abstractions that we need. Without this notion of capital as a process we are at a loss even to know why the other abstract determinants should be the appropriate ones for capitalist society let alone how they relate to one another, in this sense the whole process has an irreducible element – it can only be grasped in its total movement and not in its parts. As Marx wrote in the Grundrisse:

If, then, the specific form of capital is abstracted away, and only the content is emphasised ... Capital is conceived as a thing, not as a relation ... (but) capital is not a simple relation, but a process, in whose various moments it is always capital. [35]

It is this focus on capital as a process ordering social relations which gives us the method by which we can understand the succession of ordered determinations in capitalism and thus through this we have the possibility of coming to terms with the great variety of forms that capitalism produces. Earlier in the Grundrisse Marx puts this even more clearly:

In all forms of society there is one specific kind of production which predominates over the rest, whose relations thus assign rank and influence to the others. It is a general illumination which bathes all the other colours and modifies their particularity ... Capital is the all-dominating economic power of bourgeois society. [36]

If it is capital that ‘is a general illumination which bathes all the colours and modifies their particularity’ then it now follows that we cannot understand how the actual forms of capitalism relate to’ capital by working backwards from simple categories like those of wage labour and the commodity. Rather we must move forward to understand how these categories themselves function and are determined in the world by capital. But unfortunately much of what passes for Marxist economics does the former rather than the latter. Thus one writer will conceive of capitalism as ‘generalised commodity production’, another will take it as a ‘system of wage labour’, yet others will focus on even higher and more specific forms of determination and define it as a system of private property, markets or profit or whatever.

All of this runs directly counter to Marx’s own analysis where simple abstractions were meant to be filled out and not simply matched against reality. Thus, for example, Marx talks not of the commodity under capitalism but the ‘capitalist-modified commodity’. Similarly when he spoke of wage labour he did not mean by that any one concrete form – in particular the worker presenting himself at the factory gate for wages every week – but those forms of labour which create capital. Wage labour, he says, is in essence, ‘capital positing labour’. [37]

In this sense we cannot tie capitalism down and we should not expect to. It is not possible to offer simple definitions of what the system is or will be:

A definition fixes the superficial attributes of a thing at any given moment or period, and thus transforms these attributes into something permanent and unchanging. To understand things it is necessary to grasp them genetically, in their successive transformations and thus to discover their essence, their notion. It is only a pseudo-science that is satisfied with definitions and the phenomenal aspects of things. [38]

Instead we must gear ourselves to following the successive transformations that capital produces as it is driven to preserve itself through its competitive self-expansion.

We cannot then, analyse the world through a set of pre-ordained theoretical categories. Rather these categories must themselves be continually reconstructed in their different determinations as we analyse actual forms of development such as those we have attempted to identify in the first part of this article. If by contrast we now turn to see how other Marxists have dealt with the problem we will be able to see the distance that both separates them from us and, we have argued, Marx himself. It would not be appropriate here to enter into a detailed critique of these other views, instead we will rest content with a more general focus on what they have in common and in particular their tendency to reduce capitalism to a given structure or model which is then held up to reality.

Just what this model or structure consists of varies. For some it is like the ‘ideal type’ of the German sociologist Max Weber: we select a number of characteristics which form our ‘ideal type’ and then hold it up to existing capitalism for comparison. But now we should be able to see how inadequate this approach is. Weber’s method was, in fact quite distinct from Marx’s. Despite a huge Weberian scholarship no-one seems at all clear about the method which Weber used to construct his ideal types. They are essentially static constructions in which parts are deliberately exaggerated for supposed illumination. The different levels at which they are supposed to operate and the different levels within them are equally unclear in Weber’s writings. By contrast the steps in Marx’s argument appear a model of clarity. Firstly its focus is dynamic – on process. Secondly its abstractions are real in the sense that they are not abstract definitions against which to judge the world but categories which enable us to understand real relationships. (This incidentally in why Marx spends so much time showing us the relevance of each abstraction!) And, thirdly, as we argued above, the order of determination in Marx’s argument is clear.

To raise the spectre of Max Weber in this context might seem a red herring since while ‘orthodox social science’ accounts frequently relate Marx and Weber few Marxists consciously do. Yet unconsciously the refusal of Marxist economists to focus on capitalism as a process of determinations inevitably produces a vision of capitalism whose method is closely related to that of Weber and bourgeois social science in general. This can be seen, for example, the huge literature generated in what has been called ‘the modes of production’ debate which has sought to deal precisely with the variety of forms which we discussed earlier. Here modes of production appear as structures which are ticked off against the world. There is, of course, debate about the character of these structures. In respect of capitalism it has recently focussed on a clash between those who see capitalism’s essence as commodity production and those who see it as wage labour. But the method that underlies both approaches is the same. Instead of recognising the kaleidoscope of forms that capitalism operates through, the simple categories themselves determine what is and is not capitalism. Thus for some American slavery is not capitalist because it is not based upon some simple conception of wage labour, for others it is because it produced commodities; for some the Soviet Union has commodities and that is sufficient in itself to make it capitalist, for others they must find wage labour in a form that they can assimilate to their own abstract conception. The terms vary but the method of treating the world through appearances and simple abstractions remains the same. At its crudest we seem almost to have 49% wage labour equals ‘non-capitalist’; while 51% wage labour equals ‘capitalist’!

Recently in this debate a powerful case has been put with great force by what we can call the ‘wage labour school’. Thus writers like Dobb, Laclau, Brenner and Callinicos all concur. [39] But what they all take to be wage labour is nothing other than a phenomenal form – namely a freely negotiated wage contract. In other words instead of seeing the essence of wage labour in Marx’s sense of labour producing capital in its specific determinations they remain content with one appearance that is produced out of the hat as a determining form. Nowhere in Marx so we find this attenuated view. [40] If wage labour is that labour that produces capital then its form can vary enormously from the freely negotiated wage contract to the forced labour of British and other imperialisms in the colonial world to the labour of concentration camp prisoners in Nazi Germany to the labour of the worker tied to his job for life by his pension fund to the worker in the ‘planned’ economy of the Soviet Union.

In other words the point is not to erect another and allegedly superior defining category for capitalism in place of the commodity. It is to show that capitalism cannot be analysed in this way at all. In fact, although we do find a particular historical order in the development of capitalism, there is no a priori reason to see either particular commodity forms or wage labour forms or indeed any other forms as being specifically capitalist or non-capitalist. The determining question when these forms make their appearance is whether and how they are subordinated to the circuit of expansion of capital. But this is a question that can only be answered historically through careful investigation. It cannot be dealt with by the imposition of a priori theoretical constructions. To do so is to reduce the analysis of social processes to mere classification. [41]

This same tendency, however, appears in other guises too. A particularly influential example is the argument by Ernest Mandel that in his analysis Marx presents us with capitalism in its ‘chemically pure form’. In this sense Mandel argues that capitalism has become purer over time and therefore overcome the variety of forms that existed in Marx’s time. Thus, in his introduction to the Penguin edition of Capital, he writes that:

Today’s Western world is much nearer to the ‘pure’ model of Capital than was the world in which it was composed ... Without courting paradox one could even contend that from a structural point of view, the ‘concrete’ capitalism of the final quarter of the twentieth century is much closer to the ‘abstract’ model of Capital than was the ‘concrete’ capitalism of 1867, when Marx finished correcting the proofs of Volume One. [42]

But the difficulty here is now a fairly obvious one. If capitalism has made itself purer in some instances (in the sense that the degree of mediation between the simple abstraction and reality is less) it has equally in other instances made itself ‘impurer’. Capitalism never presents itself to us in a ‘pure’ form in Mandel’s sense – it is always impure in that its forms are concrete and specific. As such the impurities of its youth give rise to the impurities of its middle age which in turn are overtaken by the impurities of its old age and decay. Since discussion of Marx’s analysis as a ‘pure model’ usually abounds in inadequate chemical analogies let us add one more which is hopefully no less inadequate. Capitalism is like a radioactive isotype forever changing (and hopefully decaying!) through its various lives and only ever reaching a final stable form when it is dead. As analogies go it is not perfect but it is perhaps sufficient to suggest that a focus on any one part of the process in abstraction necessarily will do violence to the whole notion of the process itself. This leads us to our final point about how we analyse capitalism. Our argument has been that capitalism can only be grasped historically but in a much more substantial sense than is usually recognised. It is a relative commonplace to recognise that in his critique of Ricardo and the other classical economists Marx attacked the way in which their analysis was vitiated historically by their lack of a concept of the ‘mode of production’. The result was that they were led to see capitalism as an eternal form and so failed to see how it was differentiated from other modes of production. But for many the relevance of history stops at this point. Once the supposed features of capitalism as a mode of production have been identified a model is then set up in which the falling rate of profit is measured or values are transformed into prices or whatever. [43] Our argument is that capitalism also has an internal history as a mode of production that cannot be abstracted from or reduced to crude stages if we are to understand it. We can only capture capitalism’s concrete forms historically because this is how they exist and develop. Thus the method of our understanding of capitalism must be neither historical nor theoretical but both theoretical and historical. To counter-pose history and theory is to negate the very essence of understanding society as a process. [44] It is explicitly not a question of bringing theory to history nor bringing history to bear on theory – Marx’s method is necessarily both theoretical and historical because capitalism develops its forms and their determinations through history by seizing on the material available to it. [45]

We can see this if we now turn to examine some of the various forms that the self-expansion of capital has taken in our time in contrast to the forms that dominated during Marx’s lifetime.

Capital in Britain today

In Britain the various forms of capitalist expansion based upon the formal subordination of labour that characterised so much of nineteenth century production have been pushed to the very margins of the economy. There they still cling to life preying particularly on the cheap and docile labour of married women trapped in the home. On a world scale, of course, it remains true that capitalism can only be understood if we recognise the continuing variety of ‘backward’ forms through which capital continues to expand. But in an economy like that of Britain or any other section of advanced capitalism capital is now based firmly on the real subordination of labour and from this base it has become centralised and concentrated on a massive scale.

Throughout the twentieth century we have seen a steady rise in the size of this capital. The pattern in Britain has varied from year to year as has the changing relative contribution of internal growth and takeover. What seems to have occurred here has been a steady internal growth supplemented by two massive merger booms in the 1920’s and the 1960’s which both shifted the degree of concentration and centralisation to new, higher levels. The result has been that whereas before 1914 Britain may have lagged behind the United States and Germany comparing modern sector for modern sector, today capital in Britain is some of the most concentrated in the world. [46]

It is difficult to find a single measure that conveys the extent of this development. Table 3 is based on the most recent data from the 1978 census of production.

Table 3

Distribution of Manufacturing Plants and Firms 1978 [47]


Plants (a)

Firms (b)

No. of

% total

% total
net output

% total

% total
net output
















1500 and over





a. Manufacturing and construction only
b. Manufacturing only

It shows firstly the change in the size of factories and plants. Today the majority of workers in manufacturing work in large units that dwarf the Victorian factory. More than half are employed in plants with more than 500 workers and these plants produce an even higher proportion of output. These plants themselves number less than 2500 and at the top concentration is even higher. A third of the labour force is employed in less than six hundred plants or 0.6% of the total number of factories and plants – each with a workforce of more than 1500. But the expansion of capital has, of course, gone far beyond a simple increase in factory size. The table also shows the degree of concentration of capital in firms. Approximately 60% of the labour force produce a slightly higher percentage of output in firms employing more than 1,500 workers.

While these census categories enable us to get a sense of the distance capitalism has travelled since Marx’s time they are hardly adequate to do full justice to the extent of its development. To see this we have to dig behind them and rely on various recalculations and estimates from the available data. These show the increasing domination of a small number of capitals at the very top. The largest one hundred firms, for example, seem to have increased their share of net output to 24% in 1935, 32% in 1958 and some 46% in 1970 when the data stop. Assets are certainly more concentrated – the estimates suggest that the top 80 firms control something like 70%. These top capitals operate on a huge scale. One calculation suggests that on average they have more than 70 plants each and employ more than 30,000 workers each. But again these figures can obscure. Within the top 100 firms the 50 largest control one third of net output, i.e. they produce three times as much as the bottom 50. [48]

The concentration of capital has largely exhausted the possibilities of horizontal and vertical integration. This is why in the last two decades conglomerate mergers which diversify the activities of individual capitals have become relatively more important. At the same time this process of concentration and centralisation has also operated on a world scale bringing the multinational face of capital to the fore. Some 70% of multinational companies are of US and British origin with those of West Germany, Japan and France next in importance. [49] Together these multinationals produce something like a fifth of world output outside the Eastern bloc. Their assets are huge, their liquid assets, for example, have been estimated to be twice the world’s gold and foreign currency reserves. Some estimates suggest that they alone do as much as three quarters of the world’s manufacturing trade. Moreover since they themselves straddle national boundaries much of what is recorded as international trade is in fact intra-company trade – for example, perhaps one third of British manufacturing exports.

Although economists have tried to justify these huge capitals as ‘rational’ in terms of various managerial, marketing and above all financial economies of scale it seems unlikely that either singly or together such explanations provide an adequate account. The drive of capital to expand cannot be reduced to the textbook criteria of economists. The dynamic of capitalism has driven capital far beyond that, itself dictating the need for ever grater accumulations of capital which are to a significant degree independent of ‘efficiency’. For what they are worth studies of the results of mergers seem to show that they do not bring significant increases in productivity, big firms do not necessarily perform better than smaller ones and monopoly does produce massive waste. [50] But capital is no respecter of economists and their conclusions and so it has still driven itself forward under a dynamic that it cannot escape.

The reason is simple – size protects. Even in the current depression the problem for big capitals is not so much bankruptcy as the threat of takeover. To protect against this it is necessary to be big enough to do the digesting and too big to be digested. A failure to sustain growth therefore can be fatal. Of course other factors feed into and supplement this drive but to find its roots we have to dig through the post hoc rationalisations of scale and pull out the expansive dynamic of capital itself.

The result of this drive, moreover, is a competition which is more ruthless than ever before. It is not a competition which operates through prices. Indeed the larger part of price competition has been eliminated amongst big capital. Prices are set on crude cost-plus mark-ups which reflect the power of big business over the market. But this does not eliminate competition itself – it displaces its expression and introduces new mediations. Here in these different forms it operates more ruthlessly through competition in product design, quality, reliability, delivery and so on. A failure in any or all of these can be just as catastrophic, if not more catastrophic than a failure to compete in conventional price terms. Between 1963 and 1978, for example, the price competitiveness of British manufacturing exports on balanced improved (in 1979–82 because of the high pound it dramatically declined). But during that same period the failure of British capitals to match their world competitors in areas other than price led the British share of world manufacturing exports to be cut in half! [51]

This drive of capital forwards has been increased rather than lessened by the changing patterns of control. Modern capitals are anonymous capitals. Behind the joint-stock form that they now all adopt a significant minority of family controlled firms can still be found. But they are a clear minority and a diminishing one. The norm in Britain is one of institutional ownership – banks, pension funds, insurance companies and so on. These financial institutions now control over half of all shares and more than 60% of all quoted shares. Day to day control of such shares, however, often rests more narrowly since many of these institutions have their funds externally managed by a small number of leading banks. Richard Minns has calculated that some 20 city institutions (the 4 clearing banks, 7 insurance companies and 9 leading merchant banks) together control between one fifth and a third of the shares of all British capitals with a stock market valuation of £40 million. [52] This does not mean that their share control is translated into detailed supervision of day to day management decisions but it does provide a major sanction against any weakening of the competitive drive. This is because far from bringing more stability these institutional funds seem to be switched around at the first signs of weakening or even to gain windfall profits from speculation. The Wilson committee investigating the city found that between 1973/1977 pension funds held their shares for an ‘imputed’ period of 6 years compared to 24 years in the 1963/67 years.

These trends will perhaps, be familiar in outline to readers and it is tempting to seize upon them alone as representing the essence of modern capitalism. It is this idea that lies behind the cruder analyses which characterise capitalism in our time as ‘monopoly capitalism’, ‘finance capitalism’ or even ‘multi-national capitalism’. Equipped then with these uncomplicated conceptions it is then possible to extrapolate any or all of these tendencies of concentration and centralisation into the future and arrive at a world dominated by a few capitals. Thus one calculation suggests on the basis of the trends of the late 1950’s and the 1960’s that by the 1990’s the 100 largest firms in Britain will control 80% of net manufacturing output. Another extrapolation based upon a similar trend period arrives at the conclusion that by the year 2000 on a world scale the top 100 multinational companies will control half of the world’s output.

State, capital and crisis

The problem with these calculations, however, is only in part the naive use of extrapolation. Concentration and centralisation can be expected to increase though perhaps not to this degree but the real problem is to understand how these tendencies relate to and to an extent are subordinated to other tendencies in capitalism in our time. It is these other tendencies that give modern capitalism its specific characteristics and so serve to separate it both from capitalism in Marx’s time and from what he could expect it to become from his vantage point.

At the centre of these other tendencies has been the vast expansion of the role of the capitalist state. Indeed masked in our general statistics of concentration are a number of state owned enterprises. State owned manufacturing enterprises like BL and Renault in cars are now responsible for 21 % of world sales of the 500 largest business corporations outside the United States. Some of these state owned capitals have become major multinational capitals. [53] But this is only the tip of the iceberg of the actual role of the capitalist state and its centrality to an understanding of modern capitalism. Its consequence has been that far from being less differentiated than capitalism in Marx’s time, modern capitalism is just as differentiated but this time in other directions.

Some idea of this can be gained from table 4:

Table 4

State and World Economy [54]



No. of


Mean value trade
as % of nat. inc.

World Trade Index
(constant 1947/9 $)

No. Treaties per
decade (1866/75 etc.)

































Columns 2, 3 and 4 illustrate some of the basic ways in which world capitalism has been tied together. Column 2 gives the mean value of trade as a percentage of national income. As can be seen this fell from a high of 56% in the sample to a low of 45% under the impact of the 1930’s depression. Then, contrary to the prognostications of some economists it rose to recover significantly in the post war years. Column 3 shows the world trade index which rose significantly in the nineteenth century, remained relatively stable in the inter-war years and then rose dramatically after 1945. Column 4 reflects the way in which at a political level capitalism has increasingly bound itself by networks of various ties. All of this might suggest a simple and undifferentiated picture of a world capitalism were it not for column one which records the way in which just as these ties were binding the world economy together so the number of states tripled!

But not only has this occurred. These states themselves now have a great role and more extensive powers than ever before. They no longer stand apart, if they ever did, from the reproduction of capital just guaranteeing the system and its framework. States are now part and parcel of the reproduction of capital itself. Capital is developed and expanded by the state and through the state. The degree varies from country to country but the tendency is an ever present one as capitalism ages.

When we look at modern capitalism then we see that the self-expansion of capital today takes two conflicting forms. At one level capital moves to expand by breaking down barriers – by internationalisation. At another level it expands through the national form itself. These tendencies are both a part of its general expansion but they are conflicting moments. [55]

In one sense it might be said that to acknowledge this is hardly original but in fact it represents a major problem for the approaches that we criticised earlier. The drive of capitalism to expand is now being reproduced through new forms and therefore we have to confront the new mediations that have arisen. Most notably the competitive drive of capital which forced the state to the fore has now made the struggle to compete a vital act of physical self-preservation. In this century capitalism has given us two world wars and a host of other ‘minor’ military conflicts. We are no longer faced with wars of limited liability. Capitalism’s wars in the twentieth century have been total wars. Between 1914–18 an estimated 60 million were mobilised. Between 1939–1945 the figure is a staggering 107 million. In the main belligerent countries between 35 and 65 per cent of the pre-war labour force was enlisted each time. The casualties were equally enormous. One estimate suggests 37 million European dead in these two wars and perhaps 55 million dead on a world scale. It is a testament to the extent and scale of the barbarity that we can only provide estimates. No-one actually knows the precise numbers mobilised, killed, maimed and injured, the margins of error are measured not in thousands but millions. [56] And if we were to try to count the toll of war since 1945 our estimates would be just as horrific and the margin of error just as wide.

But those drafted into military service or killed and injured by military action represent only one aspect of total war in twentieth century capitalism. To fight these wars it was and is necessary to mobilise the whole of economy and society. Production and labour are planned and regimented to provide for the war effort. Markets are replaced, private property ‘displaced’ in order that victory should be won.

And since 1945 this military competition has been an ever present factor at the very centre of all advanced capitalist states. Capitalist competition has led to statisation and statisation in its turn to militarisation. The result is that capitalism’s crises are now both economic and military crises. Here we are not threatened with some abstract ‘exterminism’, a threat disembodied from the society that gives rise to it. It is a threat whereby new and concrete forms of capitalist expansion, capitalist exterminism menace us all with destruction.

But the forms this mutual antagonism and drive for expansion and self-preservation take today cannot be understood by recourse to the traditional simple formulae any more than we can understand the complexities of Marx’s time by them. To take but one example, since 1945 the Pentagon has out-produced every economy in the world save the American of which it is a part and the Russian economy. But it does not operate through markets and commodities, even the simple category of wage labour makes little sense when applied to much of its labour force. It is in fact the world’s second largest planned economy in terms of its output. [57] But this does not mean that we cannot understand it or any other military-industrial complex. It simply means that we have to work through new determinations, new mediations to trace the way in which the self-expansion of capital works out in our time. Nor does this requirement stop here, for the forms of development that we have just drawn attention to have affected the whole rhythm of the development of capitalism. Table 5 is based upon some calculations by Angus Maddison which deserve much wider notice.

Table 5

% Average Growth Rates Leading OECD Countries [58]



per Head

Tangible Reproducable Non-
Residential Capital Stock

Volume of





















% Average Cycle Characteristics Leading OECD Countries


Variation in
Annual GDP
Peak to Trough

Variation in
Export Volume
(P to T)


Average Rise
in Consumer


−   6.7

− 14.9


+ 0.4


− 13.1

− 34.2


− 0.7


+   0.3

−   6.0


+ 3.8


−   1.7

−   7.9


+ 9.2

Although this periodisation leaves something to be desired it shows clearly that something peculiar happened to capitalism after the Second World War. In the period 1870 to 1950, in spite of a growth in absolute capacity, rates of growth were falling and symptoms of crisis increasing. But then, after 1945, the whole system, as measured by Maddison’s sample, expanded at least twice as fast as it had ever done before at its peak prior to the First World War. The accumulation of capital as crudely measured by the data on non-residential capital stock was two and a half times as fast. The table also shows that alongside this the crisis mechanism was also fundamentally modified in these years. Crises in which output actually declined gave way to recessions in which the rate of expansion but the system itself did not contract. The amount of variation in Gross Domestic Product and export volume, and the amount of unemployment were all significantly less than ever before with perhaps the difference in unemployment being understated if we make allowance for the particular inadequacy of these statistics before the First World War. Paul Bairoch has recently calculated the ‘the accumulated world industrial output between 1953 and 1973 was comparable in volume to that of the entire century and a half which separated 1953 from 1800’. [59]

But Maddison’s data also show something else. After 1970 the system began to recapture some of its old instability. If the statistics were continued to the present this would be even more obvious. Even here, however, this has been no simple return to the past. Production has not simply crashed as it did between 1929 and 1933 and the crisis that has occurred has seen new forms rise to the fore, most notably the intensity of inflation which is apparent in the last column of Maddison’s data.

What we have to explain, therefore, is how it came to be that previous trends were suddenly reversed? Why when they were reversed the scale of the upturn was so great? Why that upturn could be sustained for some three decades but no more and why, when it failed, it did so in the form that it did? It is not difficult to immediately think of a list of possible factors that might explain these or any of the other problems we have discussed in this article.

but this is not the point. It is the manner of our explanation that is the problem. For unless our explanation relates to the dynamic of capitalism as a process of continual change it will merely be ad hoc. The list of factors may explain but what explains them and why do they come into being when they do with the force that they do?

Problems like this again present a fundamental challenge to the received version of Marxism and Marxist economics. Once our conception of capitalism becomes fixed, once we mistake its forms for its essence we have no choice but to either deny reality itself or to continually chase after it to patch up our conceptions by ad hoc additions. [60] It is then hardly surprising that it all appears to be based upon a sleight of hand. But Marxists are not conjurers, they are people who should through their understanding of capitalism be in a better position to change it. We have argued here that the basis of that position must be in the recognition of capitalism as a dynamic process of changing forms that must be unlocked in their successive determinations.

Our contention would be that it is just that approach that is to be found in Marx and in the great Marxists that came after him. It can be seen, for example, in Lenin’s analysis of agrarian development in Russia, in his more general discussion of imperialism, it can be found in Bukharin’s dissection of imperialism and the world economy and, occasionally, too it can be found in parts of Trotsky’s analysis of capitalism. It is there too in the great Marxist works of history that we still read today and we would argue further that is this tradition that we have tried to develop in this journal. [61]

It is, of course a well-established and not very convincing device of writers on the left to invoke the greater and lesser gods in their support at some stage in their argument. Readers must judge for themselves whether this is one instance where it is justified. In our terms the choice is clear – either Marxism is a means of unravelling the world as it exists or it becomes a limited set of theoretical tools with which we bludgeon a recalcitrant world into submission. Unfortunately, if the past tells us anything it is that the world will not submit, no matter how hard we try to hammer it into place and in that part of the dustbin of history reserved for Marxists there is already considerable pressure on space. It would be a pity to increase it. Theory, said Lenin, is grey but the tree of life is green – but that was well over fifty years, the tree has grown since then and the foliage is even thicker now.


1. These output data are, of course, subject to wide margins of error. They were obtained by interpolation from P. Bairoch, Europe’s Gross National Product 1800–1975, Journal of European Economic History, vol. 5, 1976.

2. In so far as the data is not entirely fictional it suggests that ‘population rose about 0.04 per cent a year over the two millennia preceding 1700, and world income no faster’. A. Maddison, Phases of Capitalist Development, Banco Nazionale del Lavoro Quarterly Review, no. 121, June 1977, p. 103.

3. W.H.B. Court, A Concise Economic History of Britain, 1954, p. 175. Court’s is one of the few general textbooks on British economic history to capture the uneven development we stress here.

4. It should also be noted that the factory inspectorate’s statistics also have a tendency to overstate average size since they are known not to have visited some of the smallest units

5. J.H. Clapham, An Economic History of Modern Britain: Free Trade and Steel 1850–1886, 1932, chapter IV.

6. Court, op. cit., p.87.

7. The major study is still an unpublished thesis, J.B. Teffrey’s Trends in Business Organisation in Great Britain since 1856 (Univ. London 1938), pp. 104, 130.

8. This estimate is reported in G.P. Jones & A.G. Pool, A Hundred Years of Economic Development in Great Britain (1840–1940), 1940, p. 169.

9. Calculated from S.J. Chapman and T.S. Ashton, The sizes of businesses mainly in the textile industries, Journal of the Royal Statistical Society, April 1914, vol. LXXVII part v, p. 538, table xiv.

10. J.M. Stopford, The origins of British based multinational manufacturing enterprises, Business History Review, vol. XLVII no. 3, Autumn 1974, p. 304.

11. P.L. Payne, The emergence of the large scale company in Great Britain 1870–1914, Economic History Review, vol. XX no. 3, 1967, p. 520.

12. R. Samuel, Workshop of the world: steampower and hand technology in mid-Victorian Britain, History Workshop, no. 3, Spring 1977.

13. A.J. Taylor, Labour productivity and technical innovation in the British coal industry, 1850–1914, Economic History Review, vol. XIV, 1961; R. Walters, Labour productivity in the South Wales steam coal industry, 1870–1914, Economic History Review, vol. XXVIII no. 2, May 1975. This situation survived for much longer. In 1924 19% of coal was cut mechanically in Britain compared to 70% in the USA. A smaller proportion was conveyed mechanically. In 1931 31% was cut by machine and 17% conveyed by machine.

14. G. Williams, Mother Wales, get off me back?, Marxism Today, Dec. 1981, pp. 14–16.

15. For the size of colliery businesses by numbers employed see Chapman & Ashton, op. cit., p. 548, table xxvii, for the situation on the eve of 1914.

16. Court, op. cit., p. 56.

17. ibid., p. 218; W.H.B. Court, The Rise of the Midland Industries, 1938.

18. D.A. Farnie, The English Cotton Industry and the World Market, 1815–1896, 1979, pp. 70, 76–77.

19. K. Marx, Capital, vol. 1, Penguin edition, 1976, pp. 1019–1025.

20. D. Bythell, The Sweated Trades: Outwork in Nineteenth Century Britain, 1978, pp. 143–156.

21. These occupational statistics are most easily studied as they were grouped together by Charles Booth in the late nineteenth century. They are reprinted in W.A. Armstrong, The use of information about occupation, in E.A. Wrigley (ed.), Nineteenth Century Society, 1972.

22. I have examined one case in the first half of the nineteenth century – Northampton – in the course of a discussion of the significance of this for an understanding of class consciousness. M. Haynes, Class and class consciousness in the early nineteenth century: Northampton shoemakers and the GNCTU, Literature and History, no. 5, 1977.

23. G. Stedman-Jones, Outcast London, 1971

24. Bythell, op. cit., p. 186.

25. S. Marglin, What do bosses do?: the origins and functions of hierarchy in capitalist production, in A. Gorz (ed.), The Division of Labour, 1976. Marglin’s documentation of his case is weak but his argument is persuasive and accords with much historical work of which he appears unaware.

26. This process has been analysed in terms of ‘proto-industrialisation’ see F. Mendels, Proto-industrialisation: the first phase of the industrialisation process, Journal of Economic History, vol. 32, 1972, and P. Kriedte, H. Medick & J. Schlumbohm, Industrialisation before industrialisation: rural industry in the genesis of capitalism, 1981.

27. All figures except that for 1880 from A.E. Musson, Industrial motive power in the United Kingdom, 1800–1870, Economic History Review, vol. XXIX no. 3, 1976. The figures for 1800, 1824, and 1850 are estimates, that for 1870 is derived from the factory inspectorate’s report, that for 1907 from the census of production of that year. The figure for 1880 is from M. Mulhall, Mulhall’s Dictionary of Statistics, 1884, p. 424.

28. Musson, op. cit., gives the industrial breakdown.

29. Court, op. cit., p. 105.

30. M.E. Faulkus, Modern British economic development: the industrial revolution in perspective, Australian Economic History Review, vol. XIX part 1, 1979, p. 56.

31. R.S. Starobin, Industrial Slavery in the Old South, 1970 dispels some of the myths about the alleged ‘inefficiency’ of industrial slavery.

32. Schneider in France had 12,500 at the same time. There was nothing in British industry to compare with works of this size at this date. The largest single employers were the big railway companies of the time. E.J. Hobsbawm, The Age of Capital, 1975, pp. 250–252.

33. This variation is still best approached through the classic works of A. Gerschenkron, Economic Backwardness in Historical Perspective, 1966 and Continuity in History and other Essays, 1968.

34. At this point it is, perhaps, worth pausing to stress that this problem is not one of prediction or prophecy about the future although one sometimes finds it posed in this way. Marx was concerned to show how capitalism as it was developing was also producing the internal contradictions that were threatening its continued survival. But this whole discussion must be separated from what Karl Popper called ‘unconditional historical prophecy’. Marx, of course, did speculate about the future of capitalism though not as much as might be expected. But he was not in the business of being a futurologist – Capital is not Old Moor’s Almanack. Capitalism itself precludes detailed prediction as the real futurologists and science fiction writers know to their cost. The problem is not only that the capitalist system is dynamic but that its dynamism is dialectical – you cannot simply extrapolate the present into the future. And, at base, in any case the survival of the system depends upon political conditions, not economic ones. We know, for example, that Marx did not expect capitalism to politically have the life it has had and he would certainly be surprised to find that it was still around on the hundredth anniversary of his death! He would perhaps be even more surprised to see the forms it has taken in the absence of the revolution he expected. Socialists should not need reminding that 1983 is not only the anniversary of Marx’s death – it is also the anniversary of Hitler being handed power in 1933. No-one in Marx’s time including Marx had any conception of the barbarous forms that would arise as the system began to atrophy.

35. K. Marx, Grundrisse, Penguin edition, 1973, p. 258.

36. Ibid., pp. 106–107.

37. Ibid., p. 463.

38. H. Grossman, The evolutionist revolt against classical economics – part II, Journal of Political Economy, vol. LI no. 6, Dec. 1943, p. 517.

39. M. Dobb, Studies in the Development of Capitalism, 1946; E. Laclau, Feudalism and capitalism in Latin America, New Left Review, no. 67, 1971; R. Brenner, The origins of capitalist development, New Left Review, no. 104, 1977; A. Callinicos, Wage labour and state capital, International Socialism, second series, no. 12, spring 1981.

40. Interestingly we do find it in Weber! ‘Rational capitalistic calculation is possible only on the basis of free labour; only where in consequence of the existence of workers who in the formal sense voluntarily, but actually under the compulsion of the whip of hunger, offer themselves, the costs of products may be unambiguously determined by agreement in advance.’ This is the fifth of six characteristics that for Weber constitute ‘meaning and presuppositions of modern capitalism’. M. Weber, General Economic History, 1981, pp. 275–278.

41. This tendency to classification can be clearly seen, as well, wherever this approach has influenced historical work – for example, Perry Anderson’s discussion of pre-capitalist modes of production.

42. Capital, Penguin edition, op. cit., introduction, pp. 12, 82–83.

43. This approach is apparent, for example, in Bob Rowthorn’s highly regarded discussion of Neo-classicism, neo-Ricardianism and Marxism. There history is only needed to establish capitalism and separate it from feudalism. See his Capitalism, Conflict and Inflation, 1980.

44. This is what is done in much of the debate started by Richard Johnson on history and Marxist theory in the successive issues of History Workshop, nos. 6, 7, 8, 1978/9. An exception is Simon Clarke’s contribution in No. 8, 1979 which puts a position which seems close to my own.

45. In discussing the ideas above with various people distaste has occasionally been expressed about their ‘Hegelian’ character. I should state bluntly that I see this neither as a sin or a cause for concern. But a more substantive comment may also be in order. The emphasis on process and the way in which the essence or notion of categories must be understood clearly derives at a general level from Hegel. However, in preparing the final draft of this article I came across an apparently little known article by Henryk Grossman published in two issues of the Journal of Political Economy, 1943, vol. LI nos. 5 & 6. [Note by ETOL: Extracts can be found here.] Since little is known of Grossman outside the German speaking world it is difficult to know where this fits into his Marxism as a whole but the piece seems worthy of note in two respects. In the first place it advances a view of Marx’s analysis that seems close to my own and I have taken the liberty of quoting from it above (footnote 38). Secondly while recognising Marx’s general debt to Hegel Grossman attributes the specific way in which Marx develops his notion of process in his political economy to an appreciation of and critique of the limitations of what he calls the evolutionist revolt against classical political economy. Not being an historian of Marx’s thought I cannot comment with any authority on the validity of this claim but I found much of the argument illuminating and certainly worthy of wider notice.

46. From A.R. Prest & D.J. Coppock (eds.), The United Kingdom Economy: a manual of Applied Economics, 9th ed., 1982, p. 242.

47. S.J. Prais, The Evolution of Giant Firms in Britain, 1976; L. Hannach, The Rise of the Corporate Economy, 1976.

48. Much useful information is collected in M. Campbell, Capitalism in Britain, 1981, although its framework is one we implicitly criticise here.

49. The reader should be warned that the definition of a multi-national company varies and so therefore do the statistics. Here we simply quote the most repeated data in the huge literature on the subject.

50. Much of this work has been done by Keith Cowling and his collaborators, see K. Cowling & D.C. Mueller, The social costs of monopoly power, Economic Journal, vol. 88, 1978 and K. Cowling et al., Mergers and Economic Performance, 1980.

51. See, for example, J. Eatwell, Whatever happened to Britain, 1982, chap. 3.

52. R. Minns, Pension Funds and British Capitalism, 1980; Challenging the bankers, New Statesman, 21 August, 1981.

53. D.F. Lamont, Foreign State Enterprise, 1979.

54. J. Boli-Bennett, Global integration and the universal increase of state dominance, 1910–1970, in A. Bergensen (ed.), Studies of the Modern World System, 1980, pp. 97–98.

55. The classic discussion remains N. Bukharin, Imperialism and the World Economy, 1972.

56. For an introduction to the problems of the statistics see J. Terraine, The Smoke and the Fire: myths and anti-myths of war 1861–1945, 1980, chaps. 3–5.

57. The comparison is not mine but the American radical economist Howard Sherman’s. Readers who want to take it further might like to note that the Pentagon owns a land area larger than a number of the Eastern European economies.

58. Maddison, op. cit., pp. 114, 115?

59. P. Bairoch, International industrialization levels from 1750 to 1980, Journal of European Economic History, vol. 11 no. 2, 1982, p. 276.

60. For example, ‘The survival of capitalism ... has certainly had a life-span far beyond what Marx expected. But this is not because the system has developed in essentially other directions than those predicted by Capital’ (my emphasis – MH) writes Ernest Mandel in his introduction to Capital, op. cit., p. 85. Here we seem to have Marx as Nostradamus!

61. See for example, C. Harman, State capitalism, armaments and the general form of the crisis, International Socialism, second series, no. 16, spring 1982. I am immodest enough to hope that it can also be found in P. Binns and M. Haynes, New theories of Eastern European class societies, International Socialism, second series, no. 7, winter 1980, which discusses another area of the world where the variety of forms subject to the domination of capital is even greater.

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