Capitalist Mode of Production - Defining Structural Criteria

Defining Structural Criteria

Marx never provided a complete definition of the capitalist mode of production as a short summary, although in his manuscripts he sometimes attempted one.

In a sense, Das Kapital as a whole provides his “definition”. Nevertheless, it is possible to summarise the essential defining characteristics of the capitalist mode of production as follows:

• The means of production (or capital goods) and the means of consumption (or consumer goods) are mainly produced for market sale; output is produced with the intention of sale in an open market; only through sale of output, can the owner of capital claim part of the surplus-product of human labour, and realize profits. Equally, the inputs of production are supplied through the market, as commodities. The prices of both inputs and outputs are mainly governed by the market laws of supply and demand (and ultimately by the law of value). In short, a capitalist must use money to fuel both the means of production and labor in order to make commodities. These commodities are then sold to the market for a profit. The profit once again becomes part of a larger amount of capital which the capitalist reinvests to make more commodities and ultimately more and more capital.

• Private ownership of the means of production ("private enterprise") as effective private control and/or legally enforced ownership, with the consequence that investment and management decisions are made by private owners of capital who act autonomously from each other and, because of business secrecy and the constraints of competition, do not co-ordinate their activities according to collective, conscious planning. Enterprises are able to set their own output prices within the framework of the forces of supply and demand manifested through the market, and the development of production technology is guided by profitability criteria.

• The corollary of that is wage labour (“employment”) by the direct producers, who are compelled to sell their labour power because they lack access to alternative means of subsistence (other than being self-employed or employers of labour, if only they could acquire sufficient funds) and can obtain means of consumption only through market transactions. These wage earners are mostly "free" in a double sense: they are “freed” from ownership of productive assets, and they are free to choose their employer.

• Being carried out for market on the basis of a proliferation of fragmented decision-making processes by owners and managers of private capital, social production is mediated by competition for asset-ownership, political or economic influence, costs, sales, prices, and profits. Competition occurs between owners of capital for profits, assets and markets; between owners of capital and workers over wages and conditions; and between workers themselves over employment opportunities and civil rights.

• The overall aim of capitalist production, under competitive pressure, is (a) to maximise net profit income (or realise a net superprofit) as much as possible, through cutting production costs, increasing sales, and monopolisation of markets and supply, (b) capital accumulation, to acquire productive and non-productive assets, and (c) to privatize both the supply of goods and services and their consumption. The larger portion of the surplus product of labor must usually be reinvested in production, since output growth and accumulation of capital mutually depend on each other.

• Out of preceding characteristics of the capitalist mode of production, the basic class structure of this mode of production society emerges: a class of owners and managers of private capital assets in industries and on the land, a class of wage and salary earners, a permanent reserve army of labour consisting of unemployed people, and various intermediate classes such as the self-employed (small business and farmers) and the “new middle classes” (educated or skilled professionals on higher salaries).

• The finance of the capitalist state is heavily dependent on levying taxes from the population and on credit; that is, the capitalist state normally lacks any autonomous economic basis (such as state-owned industries or landholdings) that would guarantee sufficient income to sustain state activities. The capitalist state defines a legal framework for commerce, civil society and politics, which specifies public and private rights and duties, as well as legitimate property relations.

• Capitalist development, occurring on private initiative in a socially unco-ordinated and unplanned way, features periodic crises of over-production (or excess capacity). This means that a critical fraction of output cannot be sold at all, or cannot be sold at prices realising the previously ruling rate of profit. The other side of over-production is the over-accumulation of productive capital: more capital is invested in production than can obtain a normal profit. The consequence is a recession (a reduced economic growth rate) or in severe cases, a depression (negative real growth, i.e. an absolute decline in output). As a corollary, mass unemployment occurs. In the history of capitalist development since 1820, there have been more than 20 of such crises; nowadays the under-utilisation of installed productive capacity is a permanent characteristic of capitalist production (average capacity utilisation rates nowadays normally range from about 60% to 85%).

In examining particular manifestations of the capitalist mode of production in particular regions and epochs, it is of course possible to find exceptions to these main defining criteria. But the exceptions prove the rule, in the sense that over time, the exceptional circumstances tend to disappear.