The emergence of new spheres of production with a lower organic composition of capital

Critics have often pointed out that according to Marx’s prognosis ‘competition rages like a plague among the capitalists themselves, eliminates them on a massive scale until eventually only a tiny number of capitalist magnates survive’ (Oppenheimer, 1927, p. 499). Sternberg repeats the same point. Having portrayed Marx’s argument in this fashion it is easy to pronounce that it is not substantiated by the concrete tendencies of historical development.

But this overlooks the essential point of Marx’s methodological procedure. Marx’s schemes deliberately simplify — they show only two spheres of production within which individual capitals progressively succumb to concentration. On this assumption the number of capitalists progressively declines. But the assumption that there are only two spheres of production is fictitious and it has to be modified so as to correspond with empirical reality. Marx shows that there is a continual penetration by capital into new spheres in which:

portions of the original capitals disengage themselves and function as new and independent capitals. Besides other causes, the division of property, within capitalist families, plays a great part in this. With the accumulation of capital, therefore, the number of capitalists grows to a greater or lesser extent (1954, p. 586)

The concentration of capital is thus supplemented by the opposite tendency of its fragmentation. In this way ‘the increase of each functioning capital is thwarted by the formation of new and the sub-division of old capitals (p. 586). Because the minimum amount of capital required for business in spheres with a higher organic composition is very high and is growing continuously, smaller capitals ‘crowd into spheres of production which Modern Industry has only sporadically or incompletely got hold of’ (p. 587). These are naturally spheres with a lower organic composition where a relatively larger mass of workers is employed.

If a new branch of production comes into being employing a relatively large mass of living labour — in which therefore the composition of capital is far below the average composition which governs the average profit — a larger mass of surplus value will be produced in this branch. Marx says that competition ‘can level this out, only through the raising of the general level (of profit), because capital on the whole realises, sets in motion, a greater quantity of unpaid surplus labour’ (1969, p. 435). Obviously this must also restrain the breakdown tendency. On the one hand the lower organic composition of capital raises the rate of profit, on the other the formation of new spheres of production makes possible further investment of capital.

In this way a cyclical movement evolves — the self-expanding capital searches out new investment possibilities while new inventions create such possibilities, new spheres of industry develop suddenly, superfluous capital is reabsorbed, and gradually there is a new accumulation of capital which is destined to become superfluous on an ever larger scale, and so on. This accounts for the importance of:

new offshoots of capital seeking to find an independent place for themselves ... as soon as formation of capital were to fall into the hands of a few established big capitals, for which the mass of profits compensates for the falling rate of profit, the vital flame of production would be altogether extinguished. It would die out. (Marx,1959, p. 259)

British capitalism is deeply symptomatic of these processes. While the traditional industrial centres of the North, of Scotland and Wales have been in a chronic crisis, a whole series of new industries have begun to spring up in the South, in the Midlands and in the areas surrounding London. A report published by the inspector-general of factories shows that these industries have a much lower organic composition of capital. For example around London, apart from a few car-assembly plants, there are factories producing bandages, minor electrical fittings, bedsteads, bedspreads, ice-creams, mixed pickles, cardboard boxes and pencils. Among the few newer industries with a fairly high organic composition are rayon and automobiles. The latter involves some 14 500 units, over half of which are repair shops scattered across the country. According to data released by the Ministry of Labour (1926) the number of workers employed in the new industries increased by 14 per cent in the space of three years (1923—6), while those employed in the older industries like coalmining and shipbuilding declined by 7.5 per cent.

Earlier Britain could afford to import small-scale stuff from the Continent and Japan, whereas now it has to produce it itself. Even if the development of such industries does relieve the general impact of the economic depression it cannot compensate for the catastrophic consequences of the decline of the older branches which formed the basis of Britain’s domination. In fact the new industries employ a total of only 700 000 workers, whereas the majority are still in the traditional branches like coal, textiles, shipbuilding and so on.