How Capitalism Defeats Itself
Contradictions inside of the capitalist mode of production create a system that fails repeatedly and cyclically, and one that will lead to its own destruction in the future. This article will attempt to explain this phenomenon in a readable and relatable way.
There are two major contradictions that Marx denoted, and many smaller ones that happen as a result of these.
The first contradiction: the relentless drive for profit and expansion of markets leads to an increased demand for labor, which paradoxically works to raise wages. To avoid this ‘regrettable’ outcome, capitalists must work to replace labor with machinery, automation, etc. This is not a bad thing in and of itself, as AI in particular has the potential to lessen the workload of society, and could lead to shorter work days under socialism. First, one must abandon the profit motive. You cannot draw surplus value from a machine however, and its value goes down over time. This creates a tendency of the rate profit to fall over time. The graph below does a great job of highlighting that.
You can see here that although temporary bumps can be achieved via restructuring of the global economy (for example), in the long run it still goes down. This will force a confrontation between increasingly exploited workers and capitalists who can barely keep their investments and labor profitable.
The second contradiction can be seen in the increase in alienation that workers experience under capitalism. In a drive for profit and increased productivity to combat rate of profit decline, capitalists must use more and more machinery, which leads to larger workplaces. This use of machines leads to high levels of specialization and division of labor, where workers begin to hold domain over only a single part of a production process. This type of work is highly alienating and unsatisfactory, and in response capitalists must create higher levels of supervision and authority in the workplace to ensure high productivity. This creates friction and a dictatorial top-down hierarchy of work. Marx calls this process the ‘law of increasing immiseration’.
Although work has changed tremendously since Marx wrote about capitalism, and many jobs have become white collar and travelled away from the factory, these contradictions remain at the forefront of the economic system.
We see now that the rate of exploitation of workers can be seen in both a sociological and an economic light. What this means is that since the rate of exploitation is bound to wither away at a worker’s ability to consume, it defeats itself in the pursuit of profit and expansion. A capitalist can only exploit their workers so much before they cannot consume the very commodities they produce. This leads to crises of over-production, and the cyclical boom-and-bust cycles we see every decade or less.
Capitalists do their best to get around this crisis: massive credit systems that provide artificial spending power for proletarian's while also allowing a new avenue of exploitation, aggressive consumerist advertising campaigns, planned obsolescence built into products to keep the consumption cycle in pay, etc. Recently we’ve seen developments like cryptocurrency and NFTs, both of which can be seen as a further layer of commodification built on speculative finance, but with a low enough barrier to entry that workers can join in on the ‘fun’.
Oftentimes nowadays, Marxist’s use the term ‘contradictions of capitalism’ on a very colloquial basis, as a means to highlight the stark differences between what the owners of the means require vs what the workers require for subsistence. When Marx wrote about contradictions, he took a more historical materialist approach to it, highlighting how contradictions within economic systems provide the need for an overhaul and progression, and have done so throughout history, even prior to capitalism as we know it. He argued that contradictions between a society’s system of economic organization and its capacity to develop what is needed to further its productive potential are what bring about its downfall.
An excellent example of this can be found in the climate crisis. Even as it looms ever closer, the global economic system as a whole cannot respond adequately within the constraints of the profit-driven capitalist system. What is needed is a full mobilization of the world economy towards climate disaster mitigation, and the need to sustain profit levels and growth stand in contradiction to this. Climate change will create such an immiserated proletariat one cannot help but hope that a better world is on the horizon.
These contradictions between the relations of production (who has ownership and control) and the forces of production (who actually produces) necessitate the need for transformation of the economic system.
Marx observed this happening in the feudal system, which began to hamper its own growth in later years, requiring the full and unfettered development of production via the market, aka capitalism. Now too, the system of capitalism has passed its peak of productive potential (one could argue it did after the Golden Age in the above graph) and therefore laid the groundwork for socialism, the next stage of production and humanity. Through prototype examples in the USSR, China, and elsewhere, we’ve been able to see how economies can make incredible strides in growth, production capacity, and living conditions in short order: just imagine what the world could do without the presence of imperialism, sabotage, isolation and reactionary counterrevolution.
History flows in non-linear ways. It jumps forward before being clawed back by the forces of reaction. In the previous century, we saw the USSR create a tremendous progressive force all throughout the world, inspiring and materially helping countries like Cuba, Venezuela, and China at the time to turn the tide on their own ruling classes and develop their own unique models of socialism. Yet in 1991, the world was thrust back into darkness and the light of the USSR was snuffed out, leading to a record breaking period of austerity as the previous Soviet countries were privatized by the global and regional capitalist class. Nowadays we have another shining example of the transient system of socialism in the East, China, whose path to prosperity has given the world an incredible example of human-centered economics. Through development projects such as the Belt and Road Initiative, China is helping give countries crushed under the weight of the neoliberal world order a chance at autonomy and a chance to build their own paths towards the future. Each year as profit spirals downwards, temperatures creep upward, and wars devastate the working classes of the world for the sake of resources or protection of national interests, we get a step close to a turning point.
Will you be there to push for progress and your own material interests as a member of the working class? I hope so!
