The General Law of Capitalist Accumulation
Reviewed date: 2005 Dec 16
28 pages
This short essay is an excerpt from chapter 25 of Karl Marx's Capital. Marx explains the relationship between labor capital and material capital. That is, a certain amount of labor (human workers) is needed to transform a certain amount of raw materials into a finished product.
The ratio of labor to raw materials is not fixed, however. Economies of scale come into play, as do advances in technology that enable a single worker to accomplish more. Marx also explores the relationship between the supply and demand of human labor and the rise and fall of real wages. According to Marx, a capitalist free market will tend to favor large businesses that can leverage their economies of scale to put competitors out of business. Then the big businesses will squeeze their work force and (because the labor market is now weak and people don't want to lose their jobs) reduce their employees to paupers. There is no other conclusion: capitalism leads to permanent extreme poverty.
Marx's conclusion seems to be this: "Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital."
With the benefit of 150 years of history, we can now see that Marx was completely wrong.