Paul Mattick 1957

Marxism and the Latest Stage of Capitalism

Source: Western Socialist, Boston, USA, March-April 1957;
Transcribed: by Adam Buick.

Contemporary Capitalism. By John Strachey, Random House, New York, 1956 (pp. 374; $5.00).

This book represents John Strachey’s second major attempt to understand the society he lives in and to detect its general developmental trend. The first attempt — made prior to the second world war — brought him straight to Bolshevism. This second try is a rationalization of British Labour Party policies.

Capitalism, Strachey relates, finds itself in a new stage of development, characterized by monopolization, trustification, centralization, state interferences and the divorce of management from ownership. A certain amount of controlability accompanies this capitalist metamorphosis and the rules of laissez-faire have lost their validity. Instead of choosing one or another of the various names that have become attached to this new situation, such as monopoly capitalism, state capitalism, the welfare state, etc., Strachey simply calls it “the latest stage of capitalism.”

Even though Marx’s theory of accumulation fits this development better, in Strachey’s opinion, than the bourgeois “vision of perfect competition,” it, too, he says, deviates from the truth. Marx failed because of an original error associated with the labor theory of value. And though, as regards general price levels, “over broad, long-term, historical trends the labor theory of value retains its essential contact with reality,” real objections against its use must be raised.

Labor Theory of Value

By taking man-hours as our unit of value, Strachey warns us, “we shall have no way of expressing changes in the productivity of labor.” For then it is clearly impossible for any country ever “to get richer except by more of its inhabitants working, or by working longer hours. But this is to fly in the face of experience. But this is to fly in the face of experience. Over the past 100 years many communities have got much richer and though the proportion of their population doing productive work has risen, their hours of work have greatly fallen.” Apart from this, yet connected with it, the labor theory of value is false because it includes a “subsistence theory of wages.”

What these objections indicate is a lack of comprehension as to the meaning of the labor theory of value in Marx’s theoretical system. They also contradict Strachey’s own statement about its validity in the long-run, for changing price levels imply increasing productivity as measured by labor time. In fact, the labor theory of value explains all economic development by the rising productivity of labor through the application of new techniques and the growth of capital, I.e. means of production. But whatever the productivity of labor, a man-hour remains an hour of work and total social labor, during any period of time, creates a definite quantity of products for distribution between capital and labor and the accumulation of capital.

In order to understand the effect of the growing productivity of labor on prevailing social relations, Marx’s model of capital development, as presented in Capital, is based on the labor theory of value and on some simplifying assumptions that have no direct counterpart in reality. Competition, for instance, is disregarded; commodities are always exchanged at their value even though they must deviate from prices. For society as a whole, of course, all prices are equal to all values, but “society as a whole” is a mental construct and not the actually-existing capitalist system. Abstract analysis could yield clues for understanding actual developments; it did not claim identity with them.

The “National Product”

It was not Marx’s intention to actually measure the real increase in either individual or social productivity as manifested in the growth of the “national product.” If he had such intentions, there is nothing he could have done about it since the necessary empirical data did not exist, moreover, the “methods of the contemporary economic statisticians,” which Strachey wishes to turn to, yield nothing that could answer questions raised by Marx. The increase, or decrease, of the “national product” in monetary terms and its distribution between the social classes and their various purposes reveals nothing as regards the consequences of capital formation under exploitative capital-labor relationships. The limited and ambiguous character of the available statistical material explains only itself. And though a Marxist will not object to empirical evidence and will prefer concrete to abstract analysis, with regard to most social problems this will have to await non-capitalist conditions in which production and distribution are determined consciously instead of by the fetishistic drive for accumulation.

Although capitalist production is production of surplus-value, i.e. profits, and is such by strength of the capitalist, or state, monopoly of the means of production, the distribution of the social product — in theory assumed to be determined by the law of value — is actually determined by both the production and reproduction costs of labor power and the class struggle. Strachey points this out but uses it as an argument against Marx — completely unaware that on this point he and Marx are in full agreement. Marx has no “iron law of wages” as Strachey asserts. He opposed those who believed in such a “law.” According to Marx, the real incomes of the workers can rise with rising productivity; wages and profits can rise simultaneously, or one more than the other, or one only at the expense of the other. It all depends on human activities within existing class relations.


Of course such actions have consequences for the development process. For instance, the less of the total social product that falls to the workers the more rapidly capital can (but may not) accumulate. Capitalism, furthermore, is beset by more problems than just the division of the social product. Value-analysis revealed that capital production, which implies a more rapid investment in means of production than in wages, contains in itself a tendency to reduce profit-rates, based, as they are, on total investments. But this is offset by the increasing productivity of labor and extension of the capitalist mode of production. Nevertheless, when profit requirements for continuous capital accumulation become too great within a given state of exploitability, capital expansion issues unto “over-accumulation,” wherein a further capital production becomes unprofitable.

Paradoxically, “over-accumulation” can be overcome by further accumulation, since it is “over-accumulation” only in relation to a given state of exploitation. With an improvement of the latter, “over-accumulation” ceases to live up to its name. Periods of “over-accumulation” find concrete expression in crises and depressions — conditions, obviously in which a further capital expansion appears unprofitable. By bringing about changes in capital structure through devaluations, capital destruction and capital concentration, depressions restore conditions for profitable capital production and therewith determine their own temporary character.


Although this is not the place to restate Marx’s theory of accumulation, nor to relate the meaning of the possibilities and limitations of the labor theory of value on which it is based, even what little has been said here should indicate that Strachey comprehends neither one. He interprets Marx’s crisis-theory as one of “under-consumption” derived from a “subsistence theory of wages.” But Marx was not an “under-consumptionist,” and even though “over-accumulation” is characterized by the predominance of the so-called “realization problem,” that is, the inability to convert surplus-value into additional capital and by the general over-production of commodities. Yet, “under-consumption,” in Marx’s view, accompanies the whole of capitalist development, in depressions as well as in prosperity. Although “over-accumulation” incorporates a glut of the commodity markets, depressions are not ended by increasing the consuming power of society relative to its production but by increasing the rate of accumulation which only widens the discrepancy between production and consumption — whatever the latter might be.

It is just this discrepancy, however, which Strachey denies, at any rate for England and the United States. The growing contradiction, he says, between production and working-class consumption which Marx described as the increasing misery of the proletariat has not taken place. Not only have living conditions improved but the workers’ share of the total social product has remained largely the same and even risen in recently history. Strachey offers statistical evidence that neither absolute nor relative increase in misery accompanied the accumulation process.

Without going onto the ambiguities and trickeries of the statistical evidence, it can be freely admitted that there has been no increasing impoverishment of the working classes in highly-developed capitalist nations. Whatever miseries some workers experienced and still experience, and through whatever miserable times the whole of the working classes have passed and will pass again, the prophecy of an increasing economic pauperization remains unfulfilled.

Working Class Predicament

Marx’s abstract capital analysis allows capital to grow at the expense of labor; that is to say, the workers never receive more than the equivalent of their production and reproduction costs. This abstract scheme does not imply the increasing misery of the working class. When Marx speaks of the latter’s increasing misery, he deals with the actual world of capital production, with market and imperialist competition, with stagnation, crisis, depression and mass unemployment; with all the social miseries, in short, which accumulate with the formation of capital. He describes and projects into the future those conditions of the working class which led him, in the first place, to the writing of Capital.

Marx even speaks of wages “below value,” of slave-labor within the conditions of capitalism, of the degradation of the laborer within the production process, the de-humanization of all social relations of capital production. The possibility of wages “below value” suggests that of wages “above value” not only in the sense of a division between extremely badly- and extremely well-paid workers but, as stated before, for all the workers at the expense of capital. There is nothing in Marx which contradicts the possibility of an improvement of the workers’ conditions within capitalism, provided, of course, they fight for it and are successful in their struggle. Workers, according to Marx, can do even more if they choose to. By altering the system of production, they can get rid of capitalism altogether.

The fact, then, that in some capitalist nations the workers proved themselves able to prevent their impoverishment and even succeeded in bettering their conditions — thanks either to special circumstances, an exceptional high productivity, foreign exploitation, or their own class actions — is no guarantee that they will always, and everywhere, be able to do so. Marx, at any rate, did not think so and the probability of increasing misery was more real to him than a steady improvement in the conditions of the workers and therewith a slow transformation of capitalism into socialist forms of production and distribution. For this much is clear — a steady betterment of the workers’ conditions and a steady increase in their share of the social product not only hampers capital accumulation but destroys the fetishistic nature of this process.

Workers’ Conditions May “Improve”

What has actually happened in recent history to disprove Marx’s pessimistic predictions with regard to the working class? Up to 1939, according to the figures used by Strachey, the British workers’ standard of living “has risen just about in step with the rise in total national income, their share remaining about constant.” This meant that “some 10% of the population got about one half of the national income and the other 90% got the other half of the national income.” Since then there has been a slight “re-distribution” of the national income in favor of the working class, which, according to Strachey, may be only temporary, unless the workers fight to maintain and increase their gains. The statistical evidence itself offers no real proof for these statements since it counts some profits (called salaries) as wages, disregards undistributed profits, including military expenditures in the wage-bill, and so forth. The “re-distribution,” it is pointed out, started with the second world war and has since then been maintained only with great difficulty despite conditions of full employment and the growth, resulting from capital concentration and large-scale enterprise, of the wage-earning layers of society. This, however, need not concern us here; nor the consideration that “re-distribution” in monetary terms was accompanied by an actual decline in living standards due to war and post-war conditions characterized by shortages, rationing, forced savings, and so firth. For even if the statistical evidence were correct, all that it would indicate is that there was no impoverishment of the British working-class in prosperous times. In other words, the rate of exploitation was such that capital could simultaneously accumulate and improve the living standards of the workers, or prevent them from deteriorating. For the long years of depression, this, of course, was just as obviously not true.

The “Keynesian Revolution”

Depressions have a tendency of getting more severe, affecting larger parts of the world, increasing and prolonging unemployment, creating conditions of general despair and discontent. The last great depression, however, which called forth government interferences, gave rise to the idea that depressions are preventable merely by turning the “emergency measures” of governments into permanent policies. The idea was strengthened by the ability of existing state-capitalist systems to maintain some sort of social stability. In economics this led to the so-called “Keynesian Revolution,” the theories of which served to justify continued government manipulation of the economy. Strachey, Under-Secretary of State for Air, Minister of Food, Secretary for War under the Labour Government, is necessarily a disciple of the “Keynesian Revolution” and — while out of office — of its radical “left-wing.”

The whole Keynesian theory boiled down to the assertion that control of investments can prevent large-scale unemployment. It also asserts that an increase of consumption could do the same; but it does not advocate such a course because “long-run” needs can be satisfied only by further accumulation. While Keynes stressed government policies that would influence private capital in favor of new investments, Strachey stresses direct government determination of the level of investments, thus fulfilling the “democratic demand” for general well-being. But this well-being is something for the future. Although he recognizes that “the higher rate of accumulation, the lower the standard of life,” he believes that after the transformation from private to social accumulation, it will “not prove difficult to convince modern electorates that a high rate of accumulation is in their long-run interests,” for “even the simplest peasant knows the necessity of putting aside the seed corn.”

Strachey Favors Capitalist Inequalities

The “simplest peasant” is not concerned with the “long-run,” however, but with the next harvest. The “modern electorate” may be concerned with the “long-run,” but this is only one more reason for them to take all immediate steps to assure its success, that is, to improve their conditions here and now and to do continuously in order that there may be a “long-run” for them. All the more so, in view of the various inequalities Strachey advocates as a pre-condition for a progressive accumulation. Although he is against “unearned” incomes of “functionless” shareholders, he favors all the inequalities that induce people to compete for high-paid functions, which are, in his mind, highly-productive functions for that very reason.

Even though a high rate of accumulation equals a low standard of life, Strachey points with pride to the fact that “the rate of accumulation instinctively established by the British Labour Government in 1945-1951 was much higher instead of lower than that which British capitalism had established in the nineteen-thirties.” If this policy is continued, he says, “then contemporary society, taken as a whole, will prove a more stable, controlled, manageable organism than did nineteenth-century laissez-faire capitalism.” Far from comprising a totalitarianism of either the Russian or the Nazi brand, it is precisely the “democratic mechanism,” that, according to Strachey, “forces governments, more or less consciously, to attempt the socialization of investments.”

19th & 2Oth Century Capitalism Compared

When it comes to the rate of accumulation, however, nineteenth-century capitalism was quite successful; nor was it as unstable an “organism” as that of the twentieth-century. Because nineteenth-century capitalism was so successful in its accumulation, the miseries of the twentieth-century exceed all the miseries that accompanied the rise of capitalism. In contrast to the static, or higher, wages of British and American workers — in so far as they are a reality — is the increasing misery, in strictly economic terms, of the bulk of mankind. Although obvious enough without statistical evidence, such evidence, though overlooked by Strachey, can be found in the United Nations reports on conditions and trends in the less-developed countries which make up the majority of the world. Against the complacency of the survivors of the capitalist holocaust of the twentieth century, with their high profits, enormous salaries, fair incomes, or sliding wage-scales, must be weighed the millions of dead, crippled, starved, tortured and displaced victims of the prevailing “prosperity,” which is based on nothing but the spoils of the last war and preparations for the next. If it is a matter of human misery and not simply of trade-union contracts in Britain and the United States, Marx’s expectations of increasing misery have proved, unfortunately, true.

Strachey’s Future NOT Socialism

But even if the future were as bright as, according to Strachey, it could be under the auspices of the Labour Party, an intelligent electorate and the “socialization of investments,” this future has no connection with socialism. Strachey’s future is nothing more than the promise of a “successful” capitalism, organized toward the steady increase of the “national income” and the improvement of living standards in the “long-run.” Not a word from Strachey about the social relations of capital production, the system of exploitation and the inescapable fact that the class structure of production determines the class nature of distribution. Not a word about the direction of production towards human goals; merely increases in production that already exists, with all its superfluities, waste and preparation for destruction through armaments and production for the sake of production. Yet, in Strachey’s view, this organized capitalism, by being practically a nationally-organized capitalism, would give the workers “a stake in the country,” something to cherish and fight for. It would eliminate, or prevent, their class consciousness, which has no basis in fact anyhow since according to Strachey Marx has been proven wrong.

At this time, with discussions about various “roads to socialism” in full swing, from Khrushchev over Gomulka to Tito, Strachey’s own contribution to the debate is no doubt the silliest of all. He advocates a nationally-organized capitalism with tendencies towards “socialism” in a country that is unable to exist except by international trade and by controlling the raw material sources of other nations — a country that is thus compelled to imperialist competition and that must, if not successful, submit to having other, more powerful, nations control its economic and social life. The “intelligent electorate” may vote itself blue in the face to assure “socialization of investments” in Strachey’s sense. But the decline of British capitalism, which has accompanied that of its imperialism, will bring with it misery on a scale that may even make Strachey — windy as he is — look to Marx once more for an understanding of the social implications of the capitalist mode of production.