Expansion of the market as a means of reducing the costs of production and circulation

To understand why foreign trade and market expansion are important we do not need to fall back on the metaphysical theory of the realisation of the surplus value. Their importance is more obvious. Hilferding argues:

the size of the economic territory ... has always been extremely important for the development of capitalist production. The larger and more populous the economic territory, the larger the individual plant can be, the lower the costs of production, and the greater the degree of specialisation within the plant, which also reduces costs of production. The larger the economic territory, the more easily can industry be located where the natural conditions are most favourable and the productivity of labour its highest. The more extensive the territory, the more diversified is production and the more probable it is that the various branches of production will complement one another and that transport costs on imports from abroad will be saved. (1981, p. 311)

Due to mass production British industry, which was the workshop of the world down to the 1870s, could carry through a division of labour, increases in productivity and cost savings to a level that was unattainable elsewhere. Whereas weaving and spinning were originally combined, later they were separated. This resulted in geographical specialisation. Burnley made the traditional calico prints, Blackburn clothed India and China, Preston manufactured fine cottons. The factory districts lying close to Manchester concentrated on more complicated fabrics, like the cotton velvets of Oldham and high quality calicoes of Ashton and Glossop. Only mass production of this kind made possible the construction of specialised machines for individual operations, and this meant important savings in investment and enterprise costs.

Manchester, previously the centre of the industry, more and more specialised as the exclusive base of the export trade. In the basements of the city’s commercial firms, which were often several stories underground, steam engines and hydraulic presses were reducing cotton yams and fabrics to half their thickness.

Such a high level of production specialisation meant huge cost reductions due to savings in non-productive expenses, reduced work interruptions and increases in productivity and the intensity of labour. Economies in production are supplemented by economies in the sphere of circulation. The number of importers, brokers and so on is compressed to the absolute minimum. An intricate system of transport connects supply bases to centres of production. Special credit organisations emerge with their own terms of payment. All of this enhances valorisation by reducing the costs of investment, manufacturing and marketing. This is what accounted for the competitive superiority of British capitalism.

The compulsion to produce the greatest possible surplus value is enough to account for the enormous importance of market expansion and struggles for markets. We do not need to fall back on Luxemburg’s notion of the necessity of non-capitalist markets for realising surplus value. In fact it is irrelevant whether the markets in question are capitalist or not., What matters is mass outlets, mass production and the specialisation and rationalisation of work and circulation which mass production makes possible. It makes no difference whether German chemicals are exported to Britain or to China.

Finally the specialisation and geographical concentration of production in specific lines contributes to the training of a highly efficient workforce, and therefore to increases in the skill and intensity of labour. A German worker cited by Schulze-Gaevernitz talks of German workers being less efficient than British workers due to lack of tradition, in the sense that in Britain workers have acquired a basic experience in handling machinery through specialised work lasting over generations. The result is that in Britain three or four workers can operate 1 000 spindles whereas in Germany at that time it needed six to ten (1892, p. 109).

We should add that France for example, which possesses an old and flourishing silk industry at Lyons, remained totally dependent on Britain for her imports of raw silk from China and Japan. All attempts to procure Chinese silk directly, with the help of French banks, failed because Britain was able to buy the silk more cheaply due to her extensive trade connections and lower freight costs. In addition despite the double freight costs involved in importing the raw material all the way from Australia and shipping the final product back there, British woollens remain cheaper and more competitive than Australian woollens because the size of the Australian market forces the individual units there to diversify instead of specialising. Domestic prices are higher than world market prices, sales are confined exclusively to the home market and this means that protection is necessary. The same holds for the woollen industries of La Plata (Argentina) and South Africa, although wool is directly available there and this dispenses with double transport costs.

All this explains why the USA has emerged as an increasingly more dangerous competitor on the world market. The enormous advantages of a large and integrated scale of operations, in territorial terms, gives American industry completely different possibilities of expansion than those available in Europe.

Mass production and mass sales have always been basic objectives of capitalist production. But they have become matters of life and death for capitalism only in the late stage of capital accumulation when a purely domestic valorisation of the gigantic mass of capital becomes more and more difficult. Mass production is necessary to obtain the various advantages of specialisation which are inseparable from mass production. It is also necessary for achieving a level of competitive superiority on the world market. Politically mass production means the triumphant domination of the large-scale enterprise over the small and medium enterprises. It explains the tendency to form transnational empires in place of the nation state. The categories in terms of which we think today are no longer those of nation states but of entire continents.