Das Kapital

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Das Kapital

First edition title page of Volume I (1867) Volume II and Volume III were published in 1885 and 1894, respectively
Author	Karl Marx
Original title	Das Kapital. Kritik der politischen Oekonomie
Country	Germany
Language	German
Published	1867
Publisher	Verlag von Otto Meisner

Das Kapital, also called Capital. A Critique of Political Economy (German: Das Kapital. Kritik der politischen Oekonomie, pronounced [das kapiˈtaːl kʁɪˈtiːk deːɐ poˈliːtɪʃən økonomˈiː]; 1867–1883) by Karl Marx is a foundational theoretical text in materialist philosophy, economics and politics. Marx aimed to reveal the economic patterns underpinning the capitalist mode of production in contrast to classical political economists such as Adam Smith, Jean-Baptiste Say, David Ricardo and John Stuart Mill. While Marx did not live to publish the planned second and third parts, they were both completed from his notes and published after his death by his colleague Friedrich Engels. Das Kapital is the most cited book in the social sciences published before 1950.

Themes

In Das Kapital (1867), Marx proposes that the motivating force of capitalism is in the exploitation of labor, whose unpaid work is the ultimate source of surplus value. The owner of the means of production is able to claim the right to this surplus value because he or she is legally protected by the ruling regime through property rights and the legally established distribution of shares which are by law only to be distributed to company owners and their board members. The historical section shows how these rights were acquired in the first place chiefly through plunder and conquest and the activity of the merchant and "middle-man". In producing capital (produced goods), the workers continually reproduce the economic conditions by which they labour. Das Kapital proposes an explanation of the "laws of motion" of the capitalist economic system from its origins to its future by describing the dynamics of the accumulation of capital, the growth of wage labour, the transformation of the workplace, the concentration of capital, commercial competition, the banking system, the decline of the profit rate, land-rents, et cetera. The critique of the political economy of capitalism proposes:

• Wage-labour is the basic "cell-form" (trade unit) of a capitalist society. Moreover, because commerce as a human activity implied no morality beyond that required to buy and sell goods and services, the growth of the market system made discrete entities of the economic, the moral and the legal spheres of human activity in society; hence, subjective moral value is separate from objective economic value. Subsequently, political economy—the just distribution of wealth and "political arithmetick" about taxes—became three discrete fields of human activity, namely economics, law and ethics, politics and economics divorced.
• "The economic formation of society [is] a process of natural history". Thus, it is possible for a political economist to objectively study the scientific laws of capitalism, given that its expansion of the market system of commerce had objectified human economic relations. The use of money (cash nexus) voided religious and political illusions about its economic value and replaced them with commodity fetishism, the belief that an object (commodity) has inherent economic value. Because societal economic formation is a historical process, no one person could control or direct it, thereby creating a global complex of social connections among capitalists.^{[citation needed]} The economic formation (individual commerce) of a society thus precedes the human administration of an economy (organised commerce).
• The structural contradictions of a capitalist economy (German: gegensätzliche Bewegung), describe the contradictory movement originating from the two-fold character of labour and so the class struggle between labour and capital, the wage labourer and the owner of the means of production. These capitalist economic contradictions operate "behind the backs" of the capitalists and the workers as a result of their activities and yet remain beyond their immediate perceptions as men and women and as social classes.
• The economic crises (recession, depression, et cetera) that are rooted in the contradictory character of the economic value of the commodity (cell-unit) of a capitalist society are the conditions that propitiate proletarian revolution—which The Communist Manifesto (1848) collectively identified as a weapon forged by the capitalists which the working class "turned against the bourgeoisie itself".
• In a capitalist economy, technological improvement and its consequent increased production augment the amount of material wealth (use value) in society while simultaneously diminishing the economic value of the same wealth, thereby diminishing the rate of profit—a paradox characteristic of economic crisis in a capitalist economy. "Poverty in the midst of plenty" consequent to over-production and under-consumption.

After two decades of economic study and preparatory work (especially regarding the theory of surplus value), the first volume appeared in 1867 as The Production Process of Capital. After Marx's death in 1883, Engels introduced Volume II: The Circulation Process of Capital in 1885; and Volume III: The Overall Process of Capitalist Production in 1894 from manuscripts and the first volume. These three volumes are collectively known as Das Kapital.

Synopsis

Capital. Volume I

Capital, Volume I (1867) is a critical analysis of political economy, meant to reveal the contradictions of the capitalist mode of production, how it was the precursor of the socialist mode of production and of the class struggle rooted in the capitalist social relations of production. The first of three volumes of Das Kapital was published on 14 September 1867, dedicated to Wilhelm Wolff and was the sole volume published in Marx's lifetime.

Capital. Volume II

Capital, Volume II, subtitled The Process of Circulation of Capital, was prepared by Engels from notes left by Marx and published in 1885. It is divided into three parts:

1. The Metamorphoses of Capital and Their Circuits
2. The Turnover of Capital
3. The Reproduction and Circulation of the Aggregate Social Capital.

In Volume II, the main ideas behind the marketplace are to be found, namely how value and surplus-value are realized. Its dramatis personae, not so much the worker and the industrialist (as in Volume I), but rather the money owner and money lender, the wholesale merchant, the trader and the entrepreneur or functioning capitalist. Moreover, workers appear in Volume II essentially as buyers of consumer goods and therefore as sellers of the commodity labour power, rather than producers of value and surplus-value, although this latter quality established in Volume I remains the solid foundation on which the whole of the unfolding analysis is based.

Marx wrote in a letter sent to Engels on 30 April 1868: "In Book 1 [...] we content ourselves with the assumption that if in the self-expansion process £100 becomes £110, the latter will find already in existence in the market the elements into which it will change once more. But now we investigate the conditions under which these elements are found at hand, namely the social intertwining of the different capitals, of the component parts of capital and of revenue (= s)". This intertwining, conceived as a movement of commodities and of money, enabled Marx to work out at least the essential elements, if not the definitive form of a coherent theory of the trade cycle, based upon the inevitability of periodic disequilibrium between supply and demand under the capitalist mode of production (Ernest Mandel, Intro to Volume II of Capital, 1978). Part 3 is the point of departure for the topic of capital accumulation which was given its Marxist treatment later in detail by Rosa Luxemburg, among others.

Capital. Volume III

Capital, Volume III, subtitled The Process of Capitalist Production as a Whole, was prepared by Engels from notes left by Marx and published in 1894. 

Seven parts of Capital, Volume III

Part	Contents
1	The conversion of Surplus Value into Profit and the rate of Surplus Value into the rate of Profit
2	Conversion of Profit into Average Profit
3	The Law of the Tendency of the Rate of Profit to Fall
4	Conversion of Commodity Capital and Money Capital into Commercial Capital and Money-Dealing Capital (Merchant's Capital)
5	Division of Profit Into Interest and Profit of Enterprise, Interest Bearing Capital.
6	Transformation of Surplus-Profit into Ground Rent.
7	Revenues and Their Sources

The work is best known today for Part 3 which in summary says that as the organic fixed capital requirements of production rise as a result of advancements in production generally, the rate of profit tends to fall. This result which orthodox Marxists believe is a principal contradictory characteristic leading to an inevitable collapse of the capitalist order was held by Marx and Engels to—as a result of various contradictions in the capitalist mode of production—result in crises whose resolution necessitates the emergence of an entirely new mode of production as the culmination of the same historical dialectic that led to the emergence of capitalism from prior forms.

Intellectual influences

The purpose of Das Kapital (1867) was a scientific foundation for the politics of the modern labour movement. The analyses were meant "to bring a science, by criticism, to the point where it can be dialectically represented" and so "reveal the law of motion of modern society" to describe how the capitalist mode of production was the precursor of the socialist mode of production. The argument is a critique of the classical economics of Adam Smith, David Ricardo, John Stuart Mill and Benjamin Franklin, drawing on the dialectical method that G. W. F. Hegel developed in Science of Logic and The Phenomenology of Spirit. Other intellectual influences on Capital were the French socialists Charles Fourier, Henri de Saint-Simon, Jean Charles Léonard de Sismondi and Pierre-Joseph Proudhon; and the Greek philosophers, especially Aristotle.

At university, Marx wrote a dissertation comparing the philosophy of nature in the works of the philosophers Democritus (circa 460–370 BC) and Epicurus (341–270 BC). The logical architecture of Das Kapital is derived in part from the Politics and the Nicomachean Ethics by Aristotle, including the fundamental distinction between use value and exchange value, the syllogisms (C-M-C' and M-C-M') for simple commodity circulation and the circulation of value as capital. Moreover, the description of machinery under capitalist relations of production as "self-acting automata" derives from Aristotle’s speculations about inanimate instruments capable of obeying commands as the condition for the abolition of slavery. In the 19th century, Marx's research of the available politico-economic literature required twelve years, usually in the British Library in London.

Capital, Volume IV

Karl Marx, Theorien über den Mehrwert, 1956

 

Karl Kautsky, editor of Theories of Surplus Value

 

At the time of his death (1883), Marx had prepared the manuscript for Das Kapital, Volume IV, a critical history of theories of surplus value of his time, the 19th century. The philosopher Karl Kautsky (1854–1938) published a partial edition of Marx's surplus-value critique and later published a full, three-volume edition as Theorien über den Mehrwert (Theories of Surplus Value, 1905–1910). The first volume was published in English as A History of Economic Theories (1952).

Publication

Capital, Volume I (1867) was published in Marx's lifetime, but he died in 1883 before completing the manuscripts for Capital, Volume II (1885) and Capital, Volume III (1894) which friend and collaborator Friedrich Engels edited and published as the work of Marx. The first translated publication of Das Kapital was in Imperial Russia in March 1872. It was the first foreign publication and the English edition appeared in 1887. Despite Tsarist censorship proscribing "the harmful doctrines of socialism and communism", the Russian censors considered Das Kapital as a "strictly scientific work" of political economy, the content of which did not apply to monarchic Russia, where "capitalist exploitation" had never occurred and was officially dismissed, given "that very few people in Russia will read it, and even fewer will understand it". Nonetheless, Marx acknowledged that Russia was the country where Das Kapital "was read and valued more than anywhere". For instance, the Russian edition was the fastest selling as 3,000 copies were sold in one year while the German edition took five years to sell 1,000, therefore the Russian translation sold fifteen times faster than the German original.

In the wake of the Great Recession caused by the global economic collapse of 2008–2009, Das Kapital was reportedly in high demand in Germany. In 2012, Red Quill Books released Capital: In Manga!, a comic book version of Volume I which is an expanded English translation of the wildly successful 2008 Japanese pocket version Das Kapital known as Manga de Dokuha.

Translations

The foreign editions of Capital. Critique of Political Economy (1867) by Karl Marx include a Russian translation by the revolutionary socialist Mikhail Bakunin (1814–1876). Eventually, Marx's work was translated into all major languages. The English translation by Samuel Moore and Marx's son-in-law Edward Aveling of book 1, overseen by Engels, was published in 1887 as Capital: A Critical Analysis of Capitalist Production by Swan Sonnenschein, Lowrey, & Co. and reissued in the 1970s by Progress Publishers in Moscow while a more recent English translation was made by Ben Fowkes and David Fernbach (the Penguin edition). The definitive critical edition of Marx's works, known as MEGA II (Marx-Engels Gesamtausgabe), includes Das Kapital in German (only the first volume is in French) and shows all the versions and alterations made to the text as well as a very extensive apparatus of footnotes and cross-references.

Reviews

In 2017, the historian Gareth Stedman Jones wrote in the Books and Arts section of the scientific journal Nature:

What is extraordinary about Das Kapital is that it offers a still-unrivalled picture of the dynamism of capitalism and its transformation of societies on a global scale. It firmly embedded concepts such as commodity and capital in the lexicon. And it highlights some of the vulnerabilities of capitalism, including its unsettling disruption of states and political systems. [...] If Das Kapital has now emerged as one of the great landmarks of nineteenth-century thought, it is [because it connects] critical analysis of the economy of his time with its historical roots. In doing so, he inaugurated a debate about how best to reform or transform politics and social relations, which has gone on ever since.

Positive reception also cited the soundness of the methodology used in producing the book, which is called immanent critique. This approach, which starts from simple category and gradually unfolds into complex categories, employed "internal" criticism that finds contradiction within and between categories while discovering aspects of reality that the categories cannot explain. This meant that Marx had to build his arguments on historical narratives and empirical evidence rather than the arbitrary application of his ideas in his evaluation of capitalism.

On the other hand, Das Kapital was also criticized for a number of supposed weaknesses. For instance, there are theorists who claimed that this text was unable to reconcile capitalist exploitation with prices dependent upon subjective wants in exchange relations. Marxists generally reply that only socially necessary labor time, that is, labor which is spent on commodities for which there is market-demand, can be considered productive labour and therefore exploited on Marx's account. There are also those who argued that Marx's so-called immiseration thesis is presumed to mean that the proletariat is absolutely immiserated., although the existing scholarly consensus tends towards the opposite view that Marx believed that only relative immiseration would occur, that is, a fall in labor's share of output.  Marx himself frequently polemicized against the view "that the amount of real wages ... is a fixed amount". 

Dialectical materialism

From Wikipedia, the free encyclopedia

Dialectical materialism is a philosophy of science and nature developed in Europe and based on the writings of Karl Marx and Friedrich Engels. In contrast to the Hegelian dialectic, which emphasized the idealist observation that human experience is dependent on the mind's perceptions, Marxist dialectics emphasizes the importance of real-world conditions, in terms of class, labor, and socioeconomic interactions. Marx supposed that these material conditions contained contradictions which seek resolution in new forms of social organisation.

Dialectical materialism accepts the evolution of the natural world and the emergence of new qualities of being at new stages of evolution. As Z. A. Jordan noted, "Engels made constant use of the metaphysical insight that the higher level of existence emerges from and has its roots in the lower; that the higher level constitutes a new order of being with its irreducible laws; and that this process of evolutionary advance is governed by laws of development which reflect basic properties of 'matter in motion as a whole'."

The formulation of the Soviet version of dialectical and historical materialism (such as in Stalin's book Dialectical and Historical Materialism) in the 1930s by Joseph Stalin and his associates, became the "official" Soviet interpretation of Marxism. It was codified and popularized in textbooks that were required reading in the Soviet Union as well as in some Eastern European countries.

The term

Marx and Engels never used the words "dialectical materialism" in their own writings. The term was coined in 1887 by Joseph Dietzgen, a socialist who corresponded with Marx, during and after the failed 1848 German Revolution. Casual mention of the term "dialectical materialism" is also found in the biography Frederick Engels, by philosopher Karl Kautsky, written in the same year. Marx himself had talked about the "materialist conception of history", which was later referred to as "historical materialism" by Engels. Engels further explained the "materialist dialectic" in his Dialectics of Nature in 1883. Georgi Plekhanov, the father of Russian Marxism, later introduced the term "dialectical materialism" to Marxist literature. Joseph Stalin further delineated and defined dialectical and historical materialism as the world outlook of Marxism–Leninism, and as a method to study society and its history.

Historical background

Marx and Engels each began their adulthood as Young Hegelians, one of several groups of intellectuals inspired by the philosopher Georg Wilhelm Friedrich Hegel. Marx's doctoral thesis, The Difference Between the Democritean and Epicurean Philosophy of Nature, was concerned with the atomism of Epicurus and Democritus, which is considered the foundation of materialist philosophy. Marx was also familiar with Lucretius's theory of clinamen. 

Marx and Engels both concluded that Hegelian philosophy, at least as interpreted by their former colleagues, was too abstract and was being misapplied in attempts to explain the social injustice in recently industrializing countries such as Germany, France, and the United Kingdom, which was a growing concern in the early 1840s.

In contrast to the conventional Hegelian dialectic of the day, which emphasized the idealist observation that human experience is dependent on the mind's perceptions, Marx developed Marxist dialectics, which emphasized the materialist view that the world of the concrete shapes socioeconomic interactions and that those in turn determine sociopolitical reality.

Whereas some Hegelians blamed religious alienation (estrangement from the traditional comforts of religion) for societal ills, Marx and Engels concluded that alienation from economic and political autonomy, coupled with exploitation and poverty, was the real culprit.

In keeping with dialectical ideas, Marx and Engels thus created an alternative theory, not only of why the world is the way it is but also of which actions people should take to make it the way it ought to be. In Theses on Feuerbach (1845), Marx wrote, "The philosophers have only interpreted the world, in various ways. The point, however, is to change it." Dialectical materialism is thus closely related to Marx's and Engels's historical materialism (and has sometimes been viewed as synonymous with it). Marx rejected the language of "thesis, antithesis, synthesis".

Dialectical materialism is an aspect of the broader subject of materialism, which asserts the primacy of the material world: in short, matter precedes thought. Materialism is a realist philosophy of science, which holds that the world is material; that all phenomena in the universe consist of "matter in motion," wherein all things are interdependent and interconnected and develop according to natural law; that the world exists outside us and independently of our perception of it; that thought is a reflection of the material world in the brain, and that the world is in principle knowable. 

Marx criticized classical materialism as another idealist philosophy—idealist because of its transhistorical understanding of material contexts. The Young Hegelian Ludwig Feuerbach had rejected Hegel's idealistic philosophy and advocated materialism. Despite being strongly influenced by Feuerbach, Marx rejected Feuerbach's version of materialism as inconsistent. The writings of Engels, especially Anti-Dühring (1878) and Dialectics of Nature (1875–82), were the source of the main doctrines of dialectical materialism.

Marx's dialectics

The concept of dialectical materialism emerges from statements by Marx in the second edition postface to his magnum opus, Capital. There Marx says he intends to use Hegelian dialectics but in revised form. He defends Hegel against those who view him as a "dead dog" and then says, "I openly avowed myself as the pupil of that mighty thinker Hegel." Marx credits Hegel with "being the first to present [dialectic's] form of working in a comprehensive and conscious manner". But he then criticizes Hegel for turning dialectics upside down: "With him it is standing on its head. It must be turned right side up again, if you would discover the rational kernel within the mystical shell."

Marx's criticism of Hegel asserts that Hegel's dialectics go astray by dealing with ideas, with the human mind. Hegel's dialectic, Marx says, inappropriately concerns "the process of the human brain"; it focuses on ideas. Hegel's thought is in fact sometimes called dialectical idealism, and Hegel himself is counted among a number of other philosophers known as the German idealists. Marx, on the contrary, believed that dialectics should deal not with the mental world of ideas but with "the material world", the world of production and other economic activity.

For Marx, human history cannot be fitted into any neat a priori schema. He explicitly rejects the idea of Hegel's followers that history can be understood as "a person apart, a metaphysical subject of which real human individuals are but the bearers". To interpret history as though previous social formations have somehow been aiming themselves toward the present state of affairs is "to misunderstand the historical movement by which the successive generations transformed the results acquired by the generations that preceded them". Marx's rejection of this sort of teleology was one reason for his enthusiastic (though not entirely uncritical) reception of Darwin's theory of natural selection.

For Marx, dialectics is not a formula for generating predetermined outcomes but is a method for the empirical study of social processes in terms of interrelations, development, and transformation. In his introduction to the Penguin edition of Marx's Capital, Ernest Mandel writes, "When the dialectical method is applied to the study of economic problems, economic phenomena are not viewed separately from each other, by bits and pieces, but in their inner connection as an integrated totality, structured around, and by, a basic predominant mode of production."

Marx's own writings are almost exclusively concerned with understanding human history in terms of systemic processes, based on modes of production (broadly speaking, the ways in which societies are organized to employ their technological powers to interact with their material surroundings). This is called historical materialism. More narrowly, within the framework of this general theory of history, most of Marx's writing is devoted to an analysis of the specific structure and development of the capitalist economy. 

For his part, Engels applies a "dialectical" approach to the natural world in general, arguing that contemporary science is increasingly recognizing the necessity of viewing natural processes in terms of interconnectedness, development, and transformation. Some scholars have doubted that Engels's "dialectics of nature" is a legitimate extension of Marx's approach to social processes. Other scholars have argued that despite Marx's insistence that humans are natural beings in an evolving, mutual relationship with the rest of nature, Marx's own writings pay inadequate attention to the ways in which human agency is constrained by such factors as biology, geography, and ecology.

Engels's dialectics

Engels postulated three laws of dialectics from his reading of Hegel's Science of Logic. Engels elucidated these laws as the materialist dialectic in his work Dialectics of Nature:

1. The law of the unity and conflict of opposites
2. The law of the passage of quantitative changes into qualitative changes
3. The law of the negation of the negation

The first law, which originates with the ancient Ionian philosopher Heraclitus, was seen by both Hegel and Vladimir Lenin as the central feature of a dialectical understanding of things:

It is in this dialectic as it is here understood, that is, in the grasping of oppositions in their unity, or of the positive in the negative, that speculative thought consists. It is the most important aspect of dialectic.

— Hegel, Science of Logic, § 69, (p. 56 in the Miller edition)

The splitting of a single whole and the cognition of its contradictory parts is the essence (one of the "essentials", one of the principal, if not the principal, characteristics or features) of dialectics. That is precisely how Hegel, too, puts the matter.

— Lenin's Collected Works Volume 38, p. 359: On the question of dialectics.

The second law Hegel took from Ancient Greek philosophers, notably the paradox of the heap, and explanation by Aristotle, and it is equated with what scientists call phase transitions. It may be traced to the ancient Ionian philosophers, particularly Anaximenes from whom Aristotle, Hegel, and Engels inherited the concept. For all these authors, one of the main illustrations is the phase transitions of water. There has also been an effort to apply this mechanism to social phenomena, whereby population increases result in changes in social structure. The law of the passage of quantitative changes into qualitative changes can also be applied to the process of social change and class conflict.

The third law, "negation of the negation", originated with Hegel. Although Hegel coined the term "negation of the negation", it gained its fame from Marx's using it in Capital. There Marx wrote this: "The [death] knell of capitalist private property sounds. The expropriators [capitalists] are expropriated. The capitalist mode of appropriation, the result of the capitalist mode of production, produces capitalist private property. This is the first negation [antithesis] of individual private property. [The "first negation", or antithesis, negates the thesis, which in this instance is feudalism, the economic system that preceded capitalism.] ... But capitalist production begets, with the inexorability of a law of Nature, its own negation. It [final communism, the synthesis] is the negation of [the] negation."

Z. A. Jordan notes, "Engels made constant use of the metaphysical insight that the higher level of existence emerges from and has its roots in the lower; that the higher level constitutes a new order of being with its irreducible laws; and that this process of evolutionary advance is governed by laws of development which reflect basic properties of 'matter in motion as a whole'."

Lenin's contributions

After reading Hegel's Science of Logic in 1914, Lenin made some brief notes outlining three "elements" of logic. They are:

1. The determination of the concept out of itself [the thing itself must be considered in its relations and in its development];
2. The contradictory nature of the thing itself (the other of itself), the contradictory forces and tendencies in each phenomenon;
3. The union of analysis and synthesis.

Lenin develops these in a further series of notes, and appears to argue that "the transition of quantity into quality and vice versa" is an example of the unity and opposition of opposites expressed tentatively as "not only the unity of opposites but the transitions of every determination, quality, feature, side, property into every other [into its opposite?]."

In his essay "On the Question of Dialectics", Lenin stated, "Development is the 'struggle' of opposites." He stated, "The unity (coincidence, identity, equal action) of opposites is conditional, temporary, transitory, relative. The struggle of mutually exclusive opposites is absolute, just as development and motion are absolute."

In Materialism and Empiriocriticism (1908), Lenin explained dialectical materialism as three axes: (i) the materialist inversion of Hegelian dialectics, (ii) the historicity of ethical principles ordered to class struggle, and (iii) the convergence of "laws of evolution" in physics (Helmholtz), biology (Darwin), and in political economy (Marx). Hence, Lenin was philosophically positioned between historicist Marxism (Labriola) and determinist Marxism—a political position close to "social Darwinism" (Kautsky). Moreover, late-century discoveries in physics (x-rays, electrons), and the beginning of quantum mechanics, philosophically challenged previous conceptions of matter and materialism, thus matter seemed to be disappearing. Lenin disagreed:

'Matter disappears' means that the limit within which we have hitherto known matter disappears, and that our knowledge is penetrating deeper; properties of matter are disappearing that formerly seemed absolute, immutable, and primary, and which are now revealed to be relative and characteristic only of certain states of matter. For the sole 'property' of matter, with whose recognition philosophical materialism is bound up, is the property of being an objective reality, of existing outside of the mind.

Lenin was developing the work of Engels, who said that "with each epoch-making discovery, even in the sphere of natural science, materialism has to change its form". One of Lenin's challenges was distancing materialism, as a viable philosophical outlook, from the "vulgar materialism" expressed in the statement "the brain secretes thought in the same way as the liver secretes bile" (attributed to 18th-century physician Pierre Jean Georges Cabanis); "metaphysical materialism" (matter composed of immutable particles); and 19th-century "mechanical materialism" (matter as random molecules interacting per the laws of mechanics). The philosophic solution that Lenin (and Engels) proposed was "dialectical materialism", wherein matter is defined as objective reality, theoretically consistent with (new) developments occurring in the sciences. 

Lenin reassessed Feuerbach's philosophy and concluded that it was in line with dialectical materialism.

Lukács's contributions

György Lukács, Minister of Culture in the brief Béla Kun government of the Hungarian Soviet Republic (1919), published History and Class Consciousness (1923), in which he defined dialectical materialism as the knowledge of society as a whole, knowledge which, in itself, was the class consciousness of the proletariat. In the first chapter "What is Orthodox Marxism?", Lukács defined orthodoxy as fidelity to the "Marxist method", not fidelity to "dogmas":

Orthodox Marxism, therefore, does not imply the uncritical acceptance of the results of Marx's investigations. It is not the "belief" in this or that thesis, nor the exegesis of a "sacred" book. On the contrary, orthodoxy refers exclusively to method. It is the scientific conviction that dialectical materialism is the road to truth and that its methods can be developed, expanded, and deepened, only along the lines laid down by its founders.

In his later works and actions, Lukács became a leader of Democratic Marxism. He modified many of his formulations of his 1923 works and went on to develop a Marxist ontology and played an active role in democratic movements in Hungary in 1956 and the 1960s. He and his associates became sharply critical of the formulation of dialectical materialism in the Soviet Union that was exported to those countries under its control. In the 1960s, his associates became known as the Budapest School. 

Lukács philosophical criticism of Marxist revisionism proposed an intellectual return to the Marxist method. As did Louis Althusser, who later defined Marxism and psychoanalysis as "conflictual sciences"; that political factions and revisionism are inherent to Marxist theory and political praxis, because dialectical materialism is the philosophic product of class struggle:

For this reason, the task of orthodox Marxism, its victory over Revisionism and utopianism can never mean the defeat, once and for all, of false tendencies. It is an ever-renewed struggle against the insidious effects of bourgeois ideology on the thought of the proletariat. Marxist orthodoxy is no guardian of traditions, it is the eternally vigilant prophet proclaiming the relation between the tasks of the immediate present and the totality of the historical process.
...the premise of dialectical materialism is, we recall: 'It is not men's consciousness that determines their existence, but, on the contrary, their social existence that determines their consciousness'.... Only when the core of existence stands revealed as a social process can existence be seen as the product, albeit the hitherto unconscious product, of human activity.

Philosophically aligned with Marx is the criticism of the individualist, bourgeois philosophy of the subject, which is founded upon the voluntary and conscious subject. Against said ideology is the primacy of social relations. Existence—and thus the world—is the product of human activity, but this can be seen only by accepting the primacy of social process on individual consciousness. This type of consciousness is an effect of ideological mystification. 

At the 5th Congress of the Communist International (July 1924), Grigory Zinoviev formally denounced Lukács's heterodox definition of orthodox Marxism as exclusively derived from fidelity to the "Marxist method", and not to Communist party dogmas; and denounced the philosophical developments of the German Marxist theorist Karl Korsch.

Stalin's contributions

In the 1930s, Joseph Stalin and his associates formulated a version of dialectical and historical materialism that became the "official" Soviet interpretation of Marxism. It was codified in Stalin's work, Dialectical and Historical Materialism (1938), and popularized in textbooks used for compulsory education within the Soviet Union and throughout the Eastern Bloc. It was exported to China as the "official" interpretation of Marxism but, in its Soviet formulation, has since then been widely rejected there.

Mao's contributions

In On Contradiction (1937), Mao outlined a version of dialectical materialism that subsumed two of Engels's three principal laws of dialectics, "the transformation of quantity into quality" and "the negation of the negation" as sub-laws (and not principal laws of their own) of the first law, "the unity and interpenetration of opposites".

As a heuristic in biology and elsewhere

Historian of science Loren Graham has detailed at length the role played by dialectical materialism in the Soviet Union in disciplines as diverse as biology, psychology, chemistry, cybernetics, quantum mechanics, and cosmology. He has concluded that, despite the Lysenko period in genetics and constraints on free inquiry imposed by political authorities, dialectical materialism had a positive influence on the work of many Soviet scientists.

Some evolutionary biologists, such as Richard Lewontin and the late Stephen Jay Gould, have tried to employ dialectical materialism in their approach. They view dialectics as playing a precautionary heuristic role in their work. From Lewontin's perspective, we get this idea:

Dialectical materialism is not, and never has been, a programmatic method for solving particular physical problems. Rather, a dialectical analysis provides an overview and a set of warning signs against particular forms of dogmatism and narrowness of thought. It tells us, "Remember that history may leave an important trace. Remember that being and becoming are dual aspects of nature. Remember that conditions change and that the conditions necessary to the initiation of some process may be destroyed by the process itself. Remember to pay attention to real objects in time and space and not lose them in utterly idealized abstractions. Remember that the qualitative effects of context and interaction may be lost when phenomena are isolated". And above all else, "Remember that all the other caveats are only reminders and warning signs whose application to different circumstances of the real world is contingent."

Gould shared similar views regarding a heuristic role for dialectical materialism. He wrote that:

... dialectical thinking should be taken more seriously by Western scholars, not discarded because some nations of the second world have constructed a cardboard version as an official political doctrine.

... when presented as guidelines for a philosophy of change, not as dogmatic precepts true by fiat, the three classical laws of dialectics embody a holistic vision that views change as interaction among components of complete systems and sees the components themselves not as a priori entities, but as both products and inputs to the system. Thus, the law of "interpenetrating opposites" records the inextricable interdependence of components: the "transformation of quantity to quality" defends a systems-based view of change that translates incremental inputs into alterations of state, and the "negation of negation" describes the direction given to history because complex systems cannot revert exactly to previous states.

This heuristic was also applied to the theory of punctuated equilibrium proposed by Gould and Niles Eldredge. They wrote that "history, as Hegel said, moves upward in a spiral of negations", and that "punctuated equilibria is a model for discontinuous tempos of change (in) the process of speciation and the deployment of species in geological time." They noted that "the law of transformation of quantity into quality", "holds that a new quality emerges in a leap as the slow accumulation of quantitative changes, long resisted by a stable system, finally forces it rapidly from one state into another", a phenomenon described in some disciplines as a paradigm shift. Apart from the commonly cited example of water turning to steam with increased temperature, Gould and Eldredge noted another analogy in information theory, "with its jargon of equilibrium, steady state, and homeostasis maintained by negative feedback", and "extremely rapid transitions that occur with positive feedback".

Lewontin, Gould, and Eldredge were thus more interested in dialectical materialism as a heuristic than a dogmatic form of 'truth' or a statement of their politics. Nevertheless, they found a readiness for critics to "seize upon" key statements and portray punctuated equilibrium, and exercises associated with it, such as public exhibitions, as a "Marxist plot".

Philosophical evaluations

Some critics argue against dialectical materialism on account of its adherence to a purely materialist worldview, while others have objections to the dialectic method it employs. There are critics, such as the Marxist Alain Badiou, who dispute the way the concept is interpreted. Joseph Needham, an influential historian of science and a Christian who nonetheless was an adherent of dialectical materialism, suggested that a more appropriate term might be "dialectical organicism". Leszek Kołakowski, writing in Main Currents of Marxism (1976), argued that dialectical materialism consists partly of "truisms with no specific Marxist content", partly of "philosophical dogmas", partly of nonsense, and partly of statements that—depending on how they are interpreted—could be any of these things. Max Eastman argued that dialectical materialism lacks a psychological basis.

Philosopher Allen Wood argued that, in its form as an official Soviet philosophy, dialectical materialism was doomed to be superficial because "creativity or critical thinking" was impossible in an authoritarian environment. Nevertheless, he considered the basic aims and principles of dialectical materialism to be in harmony with rational scientific thought.

Socialist market economy

From Wikipedia, the free encyclopedia

Socialist market economy
Simplified Chinese	社会主义市场经济
Traditional Chinese	社會主義市場經濟

The socialist market economy (SME) is the economic system and model of economic development employed in the People's Republic of China. The system is based on the predominance of public ownership and state-owned enterprises within a market economy. The term "socialist market economy" was first used during the 14th National Congress of the Communist Party of China in 1992 to describe the goal of China's economic reforms. Originating in the Chinese economic reforms initiated in 1978 that integrated China into the global market economy, the socialist market economy represents a preliminary or "primary stage" of developing socialism. Despite this, many Western commentators have described the system as a form of state capitalism.

Description

The economic reform toward a socialist market economy is underpinned by the Marxist framework of historical materialism. In the late 1970s, then-Chairman Deng Xiaoping and the Communist Party leadership rejected the prior Maoist emphasis on culture and political agency as the driving forces behind economic progress and started to place a greater emphasis on advancing the material productive forces as the fundamental and necessary prerequisite for building an advanced socialist society. The adoption of market reforms was seen to be consistent with China's level of development and a necessary step in advancing the productive forces of society. This aligned Chinese policy with a more traditional Marxist perspective where a fully developed socialist planned economy can only come into existence after a market economy has exhausted its historical role and gradually transforms itself into a planned economy, nudged by technological advances that make economic planning possible and therefore market relations less necessary.

The socialist market economy is seen by the Communist Party of China as an early stage in the development of socialism (this stage is variously called the "primary" or "preliminary" stage of socialism), where public ownership coexists alongside a diverse range of non-public forms of ownership. The Communist Party of China maintains that despite the co-existence of private capitalists and entrepreneurs with public and collective enterprise, China is not a capitalist country because the party retains control over the direction of the country, maintaining its course of socialist development. Proponents of this economic model distinguish it from market socialism as market socialists believe that economic planning is unattainable, undesirable or ineffective and thus view the market as an integral part of socialism whereas proponents of the socialist market economy view markets as a temporary phase in development of a fully planned economy.

Cui Zhiyuan traces the theoretical foundations of the socialist market economy to James Meade's model of liberal socialism in which the state acts as a residual claimant on the profits generated by state-owned enterprises that are operated independent of government management.

Proponents initially advocated a socialist market economy as a necessary stage for the development of the economy to a point where a planned socialist economy would become possible. Recent Chinese leaders including Xi Jinping (General Secretary of the Party from November 2012) have described the building of the "socialist market economy with Chinese characteristics" as the goal without any reference to a post-market socialist economy.

History

Marxism holds that, within the contradictions between the productive forces and relations of production, between practice and theory, and between the economic base and the super-structure, the productive forces…and the economic base generally play a principal and decisive role. Whoever denies this is not a materialist. — Deng Xiaoping, "On the General Program of Work for the Whole Party and the Whole Nation" (1975)

After the Great Leap Forward (1958–1961) and the ousting of the Gang of Four from power in 1976, Chairman Deng Xiaoping (paramount leader from 1978 to 1989) refocused China's efforts on economic growth and on finding an economic system compatible with China's specific conditions. However, in doing so he remained committed to the Leninist model of centralized political control and a one-party state. 

Deng Xiaoping introduced the concept of the socialist market economy in order to incorporate the market into the planned economy in the People's Republic of China. Deng first used the term during a meeting with vice chairman of the United States Encyclopædia Britannica Company Frank Gibney and director of the East Asian Studies Institute of Montreal's McGill University Professor Paul Lin Daguang, asking: "Under socialism, there can also be a market economy. [...] We can't say that this is capitalism. Our planned economy is in the primary position; it integrates with the market economy, but this is a socialist market economy". The Đổi Mới in the Socialist Republic of Vietnam later adopted the concept. Following its implementation, this economic system has supplemented the centrally planned economy in the People's Republic of China, with high growth-rates in GDP during the past decades having been attributed to it. Within this model, privately owned enterprises have become a major component of the economic system alongside the central state-owned enterprises and the collective/township village enterprises. 

The transition to a socialist market economy began in 1978 when Deng Xiaoping introduced his program of socialism with Chinese characteristics. Initial reforms in decollectivising agriculture and opening the economy to foreign investment in the late 1970s and early 1980s later led to large-scale radical reforms, including corporatization of the state sector, partial privatisation of some enterprises, liberalisation of trade and prices and dismantling of the "iron rice bowl" system of job security in the late 1990s. With Deng Xiaoping's reforms, China's GDP rose from some US$150 billion in 1978 to more than $1.6 trillion in 2004, with an annual increase of 9.4 percent.

Analysis

Many commentators and scholars have described China's economic system as a form of state capitalism, particularly after the industrial reforms of the 1980s and 1990s, noting that while the Chinese economy maintains a large state sector, the state-owned enterprises operate like private sector firms and retain all profits without remitting them to the government to benefit the entire population. This makes the rationale for widespread public ownership questionable as well as the applicability of the descriptor "socialist" and has led to concern and debate regarding the distribution of state profits.

However, starting in 2017 as part of its state-owned enterprise reform program the central government began to encourage state-owned enterprises to start paying dividends to the government. Other reforms have transferred state-owned assets to social security funds to help finance pensions and the Shenzhen municipal government has proposed using their state-owned enterprises to finance a social dividend-type of system for its residents.

Chinese economist Cui Zhiyuan argues that James Meade's model of liberal socialism is similar to China's socialist market economy and can be used to make sense of the model. Meade's model of market socialism involved public ownership of firms with independent management where the state acted as a residual claimant to the profits generated by its enterprises, but it did not exercise control rights over management and operations of its firms. The benefits of this model are that the state would have a source of income independent of taxation and debt, enabling a reduction of the tax burden on individual incomes and the private sector while promoting greater equality. Cui points to the Chongqing experience with municipal state-owned enterprises enabling high social expenditure alongside low taxes and extremely high rates of growth as validation of the socialist market economy model. The Chongqing model used state enterprise profits to fund public services including housing, providing the main source of public finance enabling it to lower its corporate tax rate (15% compared to the 33% national corporate tax rate) to attract foreign investment.

Market socialism versus capitalism

Julan Du and Chenggang Xu analyzed the Chinese model in a 2005 paper to assess whether it represents a type of market socialism or capitalism. They concluded that China's contemporary economic system represents a form of capitalism rather than market socialism because financial markets exist which permit private share ownership—a feature absent in the economic literature on market socialism—and because state profits are retained by enterprises rather than being distributed among the population in a social dividend or similar scheme, which are central features in most models of market socialism. They concluded that China is not a market socialist economy, but it is an unstable form of capitalism.

Another analysis carried out by the Global Studies Association at the DePaul University in 2006 reports that the Chinese economic system does not constitute a form of socialism when socialism is defined as a planned economy where production for use has replaced production for profit as the driving force behind economic activity, or when socialism is defined as a system where the working class is the dominant class which controls the surplus value produced by the economy. The Chinese economy also does not constitute socialism in the sense of widespread self-management or workplace democracy. The study concluded that as of 2006 capitalism is not the dominant mode of organization either and it is instead partially a pre-capitalist agrarian system with almost 50% of its population engaged in agricultural work.

As of 2015, Curtis J. Milhaupt and Wentong Zheng classify China's economic system as state capitalism because the state directs and guides all major aspects of the Chinese economy—including both the state and private sectors—while not collecting dividends from the ownership of its enterprises. They note that Chinese state-owned enterprises and privately owned enterprises share many similarities with respect to state subsidies, proximity to state power and execution of government policy objectives. Within the state sector, the emphasis is more on government control than on the ownership of assets.

Proponents of the socialist market economy compare it to the New Economic Policy in Soviet Russia that introduced market-oriented reforms while maintaining state-ownership of the commanding heights of the economy. The reforms are justified through the belief that changing conditions necessitate new strategies for socialist development.

According to Li Rongrong in 2003, chairman of the State-Owned Assets Supervision and Administration Commission of the State Council, China's socialist economic system is underpinned by the foundational role of public enterprise:

Public ownership, as the foundation of the socialist economic system, is a basic force of the state to guide and promote economic and social development and a major guarantee for realising the fundamental interests and the common prosperity of the majority of the people… The state owned economy has taken a dominant place in major trades that have a close bearing on the country's economic lifeline and key areas, and has propped-up, guided and brought along the development of the entire socio-economy. The influence and control capacity of SOEs have further increased. State owned economy has played an irreplaceable role in China's socialist modernisation drive.

Other Marxist analyses point out that because the Chinese economic system is based on commodity production, has a role for private capital and disempowers the working class, it represents a capitalist economy. Classical Marxists believe a socialist commodity economy (or a socialist market economy) is contradictory. Other socialists believe the Chinese have embraced many elements of market capitalism, specifically commodity production and privatisation, resulting in a full-blown capitalist economic system. Although many enterprises are nominally publicly owned, the profits are retained by the enterprises and used to pay managers excessively high salaries rather than being distributed amongst the population.

Characteristics

Enterprise and ownership types

Public ownership in the socialist market economy consists of state-owned assets, collectively owned enterprises and the publicly owned shares of mixed enterprises. These various forms of public ownership play a dominant role in the socialist market economy alongside substantial private and foreign enterprises.

There are a few major forms of state-owned enterprises in China today:

• State-owned enterprises: commercial enterprises established by either the central government or a local government, where managers are appointed by the government or public bodies. This category only includes wholly state-funded and managed firms. Most state-owned enterprises are not entities of the central government. Central government state-owned enterprises are subunits of the State-owned Assets Supervision and Administration Commission (SASAC).
• State-holding enterprises: state-holding, or state-controlled enterprises, are publicly listed firms where the state owns a large share or a controlling share within the firms, thereby exerting influence on the management of the firm. These include firms that receive foreign direct investment.
• State joint ownership enterprises.

State sector

The socialist market economy consists of a wide range of state-owned enterprises (SOE) that represent one form of public ownership. Beginning with the 1978 reforms, in the 1980s during the industrial reforms state enterprises were gradually corporatised and transformed into joint-stock corporations with the state retaining either full or majority ownership of their shares. By the early 2000s, most major SOEs in non-strategic sectors were listed on the Shanghai and Hong Kong stock exchanges and some SOEs adopted mixed ownership structures where the central government and various other state entities—including state banks, other SOEs, provincial and local governments—own varying degrees of the firm's listed shares alongside foreign and private shareholders. The result has been a highly diffuse form of public ownership where state-owned enterprises are owned by various different government entities, agencies and other state-owned enterprises. This makes gauging the true size and scope of the state sector difficult, particularly when SOEs with mixed ownership structures are taken into account. In 2013, the public sector accounted for 30% of the number of firms in China, but 55% of assets, 45% of revenue and 40% of profits.

In 1996, China implemented a comprehensive series of industrial reforms termed "Grasping the large, letting go of the small". These reforms involved closing unprofitable state enterprises, merging smaller enterprises and privatization of other small-to-medium enterprises. Centrally owned SOEs were reformed into joint-stock companies with the aim of delegating more authority to SOE managers. SOEs at all levels shifted their primary focus to profitability and shedded their social welfare function of providing social services and benefits to their workers in what was known as the "Iron Rice Bowl" system. The State-owned Assets Supervision and Administration Commission (SASAC) was formed in 2003 to oversee the management of the large centrally owned state enterprises.

Modern SOEs are operationally very different from those in the 1990s. SOEs are much larger in size and fewer in number, with central government-owned SOEs clustered in "strategic sectors" including banking, finance, mining, energy, transportation, telecommunications and public utilities. By comparison, provincial and municipal level SOEs number in the thousands and are involved in almost every industry including information technology and automobiles design and production. State sector reform is an ongoing process in China. As of 2017, the Communist Party of China has rejected the Singapore model of Tamasek-style state investment companies for China's SOEs, where SOEs operate solely to maximize profits on a commercial basis. In particular, China maintains that centrally owned SOEs also pursue national and industrial policy objectives. As a result of recent reforms to increase profitability and unload debt, the government reported the profits of central government-owned SOEs rose by 15.2% in 2017.

Despite becoming increasingly profitable, SOEs in China have not paid dividends to the state, causing some analysts question the rationale for public ownership in the first place. As part of SASAC's ongoing reforms, SOEs will now be encouraged and required to pay a higher portion of their profits as dividends to the state, with some state-owned assets being transferred to social security funds to help finance pensions for China's aging population. This is part of a broader reform effort of restructuring the state sector to become a source of finance for public services. As part of the SOE reform goals outlined in 2015 by SASAC, SOEs are to be classified as either commercial or public service entities, with the former being required to distribute a higher proportion of their profits as dividends. Dividend payments are set to rise from 5-15% to 30% by 2020.

Private sector

Privately owned enterprises (POEs) are recognized as one of the components of the socialist market economy alongside state, collective and individually owned enterprises. The private sector has played an increasingly large role since the adoption of the 1994 Company Law. Additionally, the boundary between public and private enterprises have blurred in China as many publicly listed firms are under mixed ownership by various state and non-state entities. Additionally, private sector firms that operate in industries targeted for growth often receive favorable loans and preferential government treatment while SOEs in non-strategic sectors might be exempt from subsidies. As an example, ZTE Corporation is a majority state-owned enterprise that was forced to rely on equity markets whereas its employee-owned private sector competitor Huawei is viewed as a "national champion" and therefore received major state funding from state banks. Like their state-owned counterparts POEs are expected to follow state policies and are subject to party control, suggesting that the distinction between public and private ownership is not a meaningful distinction to make for understanding China's economic model. As of 2015, state control and state-directed development (in both public and private sectors) is the overriding feature of the Chinese economic system that plays a more substantial role than the public ownership of assets.

While the private sector has been accorded a role in the socialist market economy and has greatly increased in size and scope since the 1990s, the private sector does not dominate the Chinese economy. The exact size of the private sector is difficult determine in part because private enterprises may have a minority of their stock owned by state entities and because of different classification standards used for classifying enterprises. For example, in the first quarter of 2016 the National Bureau of Statistics of China reported fixed investment by private firms at 35% by wholly state-owned SOEs at 27%, with the bulk of the remainder belonging to non-wholly state funded limited liability corporations.

Economic planning

By the early 1990s, Soviet-type economic planning had been replaced with market relations and markets became the fundamental driving force in the socialist market economy, with the State Planning Commission being reformed into the National Development and Reform Commission in 2003. Indicative planning and industrial policies have substituted material balance planning and play a substantial role in guiding the market economy for both the state and private sectors. The planning system consists of three layers, with each layer using a different planning mechanism.

Compulsory planning is limited to state-owned enterprises operating in strategic sectors, including research, education and infrastructure development plans. Compulsory planning outlines targeted outcomes and the supply of raw materials and financial resources needed. Contractual planning sets objectives and the overall means of achieving these goals and then negotiates with enterprises and local governments to establish detailed objectives and how resources are to be allocated to the targeted sectors. Indicative planning operates at the lowest level of the planning system, where the government outlines industrial targets and then uses market instruments (tax exemptions, subsidies and favorable bank loans) to induce firms in the targeted industry to meet these targets.