This article is meant as a compliment to the one on Productive and Un-productive Labour and the motive for writing it is essentially the same. That is to say it’s purpose is to strip away all the complex superstructural jargon that accompanies the overwhelming majority of economic commentaries and reveal the underlying socio-eoconomic reality of modern capitalism.  Anyone trying to make sense of the many economic analyses put forward since the 2008 crisis, will invariably get lost in this jargon of so-called economic ‘authenticity’. It is a discourse which seems designed to mystify the reader rather than educate them. For example on the current Greek ‘Odious’ Debt crisis one contribution suggested that;

“..this article describes the crisis as a debt-deflation spiral: to the external debt deflation in the economy’s most important sector, merchant shipping, the internal devaluation policy adds an internal debt deflation and sets off a comprehensive and cumulatively intensifying process of macroeconomic debt deflation.” (The Greek Tragedy and it Solution’. Social Europe Occasional Paper. page 6.)

This example, obscure as it is, is by no means the worst, and unfortunately, this symptom is not restricted to just the professional economists, but to those who wish to popularise the subject. Frequently, as in the above-noted contribution, there is not even a glimpse of the real world of working people and production under the obscuring blanket of superficial super-structural economic terminology. Even on the radical left, where criticism of the capitalist mode of production is regularly encountered, the terms too often used analytically are those uncritically borrowed from a bourgeois economic perspective.

Such borrowing is necessary to some degree to engage with the many contradictions of bourgeois economic ideology on its own terms, but in view of the current existential socio-economic crisis, serious criticism needs also to dig below the surface of these self-serving bourgeois categories. Criticism, from the standpoint of the exploited classes, needs to reveal what remains hidden by the terms commonly used and what fundamentals have been ignored. One such term (and category) which is taken for granted is that designated by the word ‘capital’.


The term Capital is commonly used to designate all those elements, which under the capitalist mode of production are combined together in order to produce and circulate commodities and services. These discrete, but interdependent, elements are usually designated as money-capital, commodity-capital and fixed-capital. However, if we consider more than just the terms and the sub-categories of these terms, but consider how these elements are themselves created, we find they are all the products of past labour. The money-capital used to purchase and maintain the means of production; to purchase raw materials; and to pay for present labour to work on them, are all products of past labour. That is to say, someone, previously made, the means of production and transported them, someone made or extracted the raw materials and transported them.

Even the physical money, (fiat or metallic) or electronic fiscal entries used to initiate and sustain capitalist production have been created by someone before they were made available to the capitalist producer. In other words, this element also – in quantity as well as quality – is the product of past labour. More of that later. Furthermore, money in whatever form it takes for the vast majority of people, is basically a means of exchanging goods and services.  For most people, it is only a moderate store of value. In many cases it is an unreliable store of value because it can be officially or unofficially devalued. So the first fundamental fact is that money by itself cannot make anything, and in most forms it is not really useful for anything other than exchanging goods and services. Secondly, the regular production of goods and services and their circulation, therefore, is the underlying condition of economic activity and the basis for the historic development of money as a means of exchange.

The extent and frequency of the production of goods and services, and their circulation is also the real indicator of the general well-being of any society.  Mountains of cash, or huge vaults of gold, for example, would be relatively useless if there were no reliable supply of goods and services to be purchased and thus exchanged. So the production and consumption of goods and services is not only the underlying economic foundation of all previous human communities and societies, but it remains so under the capitalist mode of production. Digging below the above-noted economists hypebole and jargon, it is obvious that the production of goods and services is only realised by the application of human labour to the raw materials provided by nature.  This is even so when natural materials are extracted and further modified (by labour) to render them suitable for later production.

In addition, it is a fact that every act of present production presupposes an element of past production. For example, the previous making of a tool with which to produce something else; the previous collection and preparation of raw materials, for further construction; or the preparation of soil for the production of plants. In other words, whether we consider the simple production of previous modes of production or the highly complex forms of capitalist modernity, production is always the application of present labour to the results of past labour. The different modes of production historically developed, do not and cannot remove this fundamental basis of all economic activity. The different historical modes have merely changed the means of bringing these two fundamental elements together.

So stripped of the jargon of economists, the owners or controllers of capital under the capitalist mode of production are revealed as not creating wealth, they merely use their money-capital to bring present labour (now salary or wage-labour) into active relationship to the results of past labour (machinery, raw materials, etc) in order for workers to produce it. To put it another way, the capitalist class do not create wealth, they simply enable wealth to be created by the workers who collectively produce the raw materials, the machines, the tools, the buildings etc., and the final goods and services. Yet problematicaly, the capitalist classes only enable production when it is profitable. They also control the type of production and they disable human production when it’s suits them. This fact alone makes their monopoly of the means of production and exchange an existential problem for working people throughout the world.

Furthermore, when they do condescend to enable the application of the present labour of workers to the past labour of workers for new production, they extract a profit (as interest) for providing that service. That profit is the monetary equivalent of the surplus production (or surplus-value) produced by the workers during their working time. And of course it is the accumulation of successive instalments of profit which then becomes new capital. In fact all capital has arisen as the surplus results of the combination of past labour with present labour during the production process. Once this underlying fact is revealed and understood it becomes clear that the capitalist classes are not only parasitic upon the present labour of the working classes, but also parasitic upon the past labour of the working classes. Their existence as a class is based upon this historic exploitation of successive generations of the working classes. Now by controlling the financial institutions of capitalist society parts of this class can – and do – pressure politicians and others to create, unemployment, low-pay and welfare cuts.


The historic development of the capitalist mode of production has seen the dominant sectors within it change from merchant-capital, through industrial-capital to the present domination by finance-capital. Yet the source of the profits and accumulation of finance-capital is exactly the same as that of the other branches of capital – the exploitative processes of production. They merely lend their money-capital to the other branches of capital (merchant or industrial) and take a share (by charging interest) in the surplus-production (profits) realised in these two branches.

In fact the finance sector of capital owes its original existence to the surplus money-capital arising from the earlier stages of domination by merchant and industrial-capital domination. Large quantities of aggregated dormant capital finding no suitable or profitable industrial or commercial investment, led to the development of purely financial speculation, the growth of interest-bearing capital sources and the creation of fictitious capital – the three interconnected aspects of finance-capital.

The domination of this branch of capital is clearly revealed by the power its current representatives wield over governments and businesses who have borrowed from this sector. Even pro-capitalistic governments such as the Syriza government in Greece, are being threatened with dire circumstances if they do not follow the dictates of the representatives of global finance-capital. These dictates include introducing more socio-economic austerity for working people and further privatisations in order to eventually pay back the loans and the interest upon them. Yet as was explained earlier, these finance-capitalists have already been parasitic upon the working classes in the past and present and now aim to be doubly so.

Thus when the government bond-holding sector of finance-capital use the interest-bearing capital accumulated from the productive efforts of workers to lend to profligate governments, they can via the political class, progressively impoverish entire countries and their populations. This is what has happened to Greece and most other European countries. The citizens of Greece are currently among those in Europe suffering the most from the machinations of this sector of the finance-capital elite. However, other countries are not too far behind this unfortunate country as pliable Governments in Europe and elsewhere bow to their wishes and institute even more austerity and allow further privatisation of public services and assets.


Thus the economic reality of the modern world is as follows; the accumulated results of the past labour of workers (appropriated and transformed into ‘capital’) is being used to impoverish and extract even more resources from the present labour of working people. In other words, the product of the workers own labour in the hands of capitalists confronts them as an alien and hostile exploiting power; first in the form of the industrial or commercial capitalist employer and; second;  in the form of the political representatives of the bond-holding finance-capitalist class.

This financial sector of the capitalist class are quite prepared to ruin not only working people but other capitalists in their ruthless greed as the recent banking and credit default swap scandals revealed. Any sensible government, even one dedicated to capitalism, would refuse to ruin or subordinate the whole capitalist system for the benefit of finance-capital. Like Iceland in the aftermath of the 2008 banking and credit default swaps crisis, such a government would default on some or even all of such politically engendered toxic loans, jail those who had signed up to them, remove the future possibility of this occurring again and heavily ‘regulate’ this sector.

Whilst any government seriously dedicated to working people and the planet would go even further. It would declare the whole capitalist system bankrupt, close it down, refuse to pay all the odious debts, transfer the assets and main means of production to the communities of workers and citizens, arm them for self-defence and start anew in a post-capitalist reconstruction. Such a government would recognise that the two essential prerequisites for wealth still exist. That is to say the products of past labour, the existence of workers eager to work, much of the raw materials necessary for production, and the extensive public assets and resources. In other words the historic task for humanity is to return control of past labour and present labour to those who do the labour, the working populations.

In any severe crisis, these two necessary resources only need putting together with almost any agreed means of exchange to allow the internal economy to start up. Future external trade can be achieved by commodity and service exchange with other economic communities, with any imbalance adjusted by agreed means. Sensibly this process would be a revolutionary reconstruction, dedicated to production for general need, not individual greed, and with a priority to non-polluting production methods and environmentally sensitive consumption.

Roy Ratcliffe (June 2015)

[See also the article ‘Productive and Unproductive Labour’ on this blog.]

This entry was posted in Anti-Capitalism, capitalism, Critique, dispossession, Economics, Finance, neo-liberalism and tagged , , , , , . Bookmark the permalink.

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