By the middle of the nineteenth century and particularly in England the basic functioning of modern capitalism clearly was revealed. The explosions of Chartism and the revolutions of 1848, as well as the vast movements extending from the United States to Russia and culminating in the Paris Commune, had revealed the turbulent disorder hidden beneath the social crust.

Two predominating factors drove the contradictions of capitalism to extremes. They were, first, the operations of the market, and second, the exploitation of wage-labor leading to the accumulation of capital.

Contrary to previous systems of society, under capitalism the anarchy of the market is the sole social regulator. According to market-price fluctuations, men are employed or dismissed, factories built or dismantled, wealth produced or destroyed, millions made or lost, countries advanced or retarded. Through the circulation of commodities, the economic world is transformed into a veritable madhouse where each person is for himself and no quarter is given. The functioning basis is competition, competition among the buyers and among the sellers, between buyer and seller, between capitalists and laborers, among the capitalists, and among the workers. The whole world lives for exchange, though it is not the humans who live so much as the commodities; the producers are merely attached to the articles exchanged. Production is primarily for the market, for sale, for profit and not for use.

Up to the time of the industrial revolution and indeed to 1825, when the first "over-production" occurred, the demands of consumption had exceeded production. With the tremendous expansion of machine production the reverse was now true. Supply pressed heavily on the market, causing periodic gluts of goods and plethora of capital.

Whereas, prior to the introduction of modern capitalism, industry and agriculture had been combined in intimate harmony, the first dependent upon the second, machinofacture reversed the situation. Industry began to lead agriculture; the city became divorced from the countryside. The increasing gap between them has been the basic source of all manner of maladjustments within the nation; on an international sphere its counterpart is the pressure of imperialist, industrialist countries upon the agrarian, colonial and semi-colonial ones.

Although production is a social operation, requiring thousands of workmen laboring co-operatively to produce even a single commodity for the use of others, and a social network of market relations connecting all, nevertheless, the productive process is not carried on for the welfare of society as a whole or for its producers, but for the profit of the capitalists who control and own the social forces and individually appropriate the social product for their own benefit. Thus, between society and its products stands the individual capitalist.

Competition among the capitalists impels the larger owners to drive out the smaller. The wealthier capitalists prevail by increasing the application of science to the productive process, thus lowering the cost of production. In this manner the development of industry effects and in turn affects a tremendous technical revolution, constantly improving the methods of production and increasing the productive ability of the workers. Nevertheless, the individualistic system of private ownership leads to an enormous waste of social forces. The soil is woefully wrung out; material means of production are scrapped and destroyed wherever profits can be raised accordingly. In a thousand ways the lives of the workmen are worn out prematurely through wanton abuse and with criminal irresponsibility. In proportion as the anarchy of the market grips society, the dictatorship of the employers within their workshops takes a firmer hold.

Driven by the necessity to lower the cost of production, the capitalists resort to a feverish attempt to displace workmen and to increase productivity. But hand in hand with the unlimited possibility for increased output goes the shrinking of the limited market. Even in the nineteenth century the profits of prosperity in industrial countries could accrue only through the terrible impoverishment of those countries whose markets had been superseded. Thus the rise of the factory system of England took place only through the throwing of millions of Indians into misery, starvation, and death. It has been estimated that approximately eighty million Indians have died of starvation alone since the beginning of the twentieth century.

Even in the best of times, when workers are put to work and wages are at their highest, the wages of the workers never rise as fast as the surplus product (profit) which the capitalist takes. Compared to the capitalist, the worker is worse off than ever; that is to say, his relative wages steadily decline. Even when he seems to improve his real wages, the improvement is often illusory. Although he may be able to buy more of the necessities of life, which is the test of real wages (as contrasted with nominal wages, which is the actual amount of money received) under the increased tension of factory work the laborer is debilitated much sooner than before, and thus the slight increase in wages each week cannot compensate him for the increased wear and tear, nor does it cover the many weeks he is forced to live without work. At the end of his lifetime of service he has practically nothing.

The capitalists, on the other hand, are goaded on by the fact that the rate of profit always tends to fall. In order to make the same profit, the capitalist has to expand his business, accumulate capital, invest more and more in machinery, buildings, etc., that is, in constant capital. The proportion of constant capital to variable capital, that is, the proportion of values invested in means of production as contrasted with the values invested in labor power, generally known as wages, gradually increases in favor of the former. All the devices of the capitalist to stop the fall in the rate of profit, such as the introduction of new inventions or the seizure of colonies, etc., only speed up the various forces causing it to fall. More and more the dead weight of capital increases, dead labor throttles living labor, the past crushes the present. Like the dinosaur of old, a huge bodily mechanism is built up which squeezes out the brain and consumes all its energies in mere maintenance, all lability being lost.

Concatenated to the growth and strength of capitalism is the augmentation of pauperism and unemployment; whether times are easy or hard, increasingly must society feed the workers by means of bread-lines and through institutions of one sort or another.

Modern capitalism, representing a great increase in private property, makes its debut by wrenching control over their means of production from the direct producers, the peasants and artisans. Commodity private property is converted into capitalist private property, where a few control the means of production and the rest are forced to sell their labor-power as a commodity. This is done only through the application of the greatest violence. Capitalism thus makes its appearance transpiring sweat and blood from every pore.

As capitalism develops, personal ownership evolves into joint stock companies and into private corporate property which in turn begins to take on a public character, and develops conjointly with State public property. The individual owners are steadily ousted from the means of production. A vast number are transformed into wage workers, a relative handful into rentiers or coupon-clippers. These coupon-clippers and investors of all sorts form a parasitic class completely divorced from the process of production, and later become the typical representatives of the capitalist class as a whole. Interested only in consumption and in the pleasures of the hour, this group staunchly supports the government and the trusts whose stocks and bonds it owns.

Simultaneously, capitalism completely revolutionizes middle class relations within the country. Whole sections of the old petty bourgeoisie, small bankers, small business men, merchants, artisans, farmers, and such, are driven from their occupations and financially ruined. On the other hand, the rise of large-scale and monopoly industry creates a new middle class, professional elements, foremen, technicians, salesmen, etc., and a host of petty interests completely dependent upon the trust or monopoly and no longer hostile to it.

Other contradictory features appear. On the one hand, each country must strive to become self-sufficient so as to be dependent on no other. On the other hand, due to the great increase of production and trade, markets become international in the truest sense of the term, and each country is bound up with the other in a world subdivision of labor. Here we have the heart of the problem that perplexes diplomats and causes great complications in international relations.

The fact that internationalism must go through the filter of nationalism has its own repercussions in the colonial field as well. The most backward countries of the world are drawn into the vortex of capitalism and all the Chinese walls of isolation are battered down, not in order to advance the backward countries nor to free the colonies, but rather further to oppress and enslave them. The welfare of the colonies is entirely subordinated to that of the home industrial country. Thus colonial progress takes on a most uneven, artificial, and exasperating character. The trend of capital to flow evenly all over the world in its quest for a higher rate of profit is burked by the monopoly control exercised by the imperialist country. The tendency of the colonies to become industrialized is sacrificed to the need of the imperialist country for sources of raw material, etc. Thus the export of capital, whose increase is one of the laws of capitalist development, is hindered by the forces of capitalism itself.

All these contradictions are developed to their highest point in the twentieth century when free competitive capitalism has become transformed into imperialism. The outstanding factors in an era of imperialism are the development of monopolies under the hegemony of finance capital, the export of capital rather than of goods, and the partition of the entire world into closed colonial systems. (*1)

In the old days trusts had been created chiefly by grant of special patents by the State and even at present there are some industries monopolized through patent rights; in the competitive period of the nineteenth century, however, most of the prominent cartels and syndicates formed were those connected with the monopolization of raw materials. As the concentration of capital became accentuated, trusts became established in many branches of trade, particularly the newly developed ones springing up in an era of tariff protection. Thus, today, "The time is past when industrial combination could be regarded as a more or less exceptional condition of industrial organization. Cartels and trusts can no longer be considered as being mainly devices of industrialists to utilize certain occasional and accidental conditions, or conditions brought about by the "artificial" means of tariff protection, to form monopolies. Industrial combination must be regarded as a form of industrial organization evolving through and adapted to certain conditions of concentration, technical, geographical, economic, arising in many groups of industry, national and international, and revolutionizing the size of the industrial unit or of the industrial undertaking." (*2)

The rise of the trust, the cartel, and syndicate (*3) under control of a centralized banking system does not lead, as popularly supposed, to the end of competition, but only to its intensification. While the trusts may bring to an end competition in a particular industry and locality, they merely transfer the arena of murderous competition. "Mr. 0. H. Cheney, vice- president of the Pacific National Bank, New York, has recognized five distinct channels through which the new competition functions." (*4) These are enumerated as vertical competition (between trusts), competition among trade associations in different industries, competition of one industry against another, rivalry of local communities against each other and, finally, international competition.

To counter the tendency of the rate of profit to fall, industry is "rationalized." Rationalization is the systematic application of scientific methods to raise the mass and rate of profit. All of science is brought to bear to extricate capitalism from its difficulties. Technical revolutions occur in every field of economic development. Industry is electrified and mechanized; automatic factories are set up. Subdivision of labor and conservation of effort become systematized in Taylor methods and similar schemes. Standardization and mass production by means of belt systems are introduced in every field. A delicate balance is worked out to obtain the best results between the efficiency of large-scale production and the economy of a smaller unit in a trust-chain system, while capital is centralized and concentrated. (*5) Scientific laboratories take up the utilization of all byproducts and waste materials. Accompanying these efforts to increase the productivity of labor goes the skillful pressure upon the workers to intensify their work and to increase their hours where possible. The speed-up and stretch-out system is wrought to an extremely high point; the labor-process becomes so condensed that the physical capacities of the laborer are exhausted in a relatively short time.

All sorts of psychological and social welfare measures are introduced to keep the workers docile in order to insure continuous production and to break up any tendency to hostile organization. Company unions are cleverly contrived to channelize the worker's discontent and to stifle his rebellion.

Concomitant with this industrial process goes a financial and commercial rhythm in harmony with it. A whole technique is developed whereby the few may control the stocks of the large corporations through the purchase and control of a minimum part of the shares. Huge holding companies are formed to manage financially the industrial organizations and to fleece regularly the common stockholders for the benefit of the few controlling ones. The amount of paper securities, stocks, bonds, symbols of money, no longer corresponds to the real wealth of the country. Speculation and insecurity become more feverish than ever. To solidify the watered stock, all sorts of gambling adventures must be launched.

Overwhelmed by the tremendous amount of goods produced, the trust financiers try to force domestic sales through the mechanism of instalment buying, prohibitive tariffs, government purchases, subsidies, and subventions. To increase foreign sales they employ the measures of wholesale dumping of exports, of obtaining forced loans, etc. All these methods, however, only intensify the periodic industrial crises when they finally arrive.

Generated by these economic contradictions in the normal evolution of capitalism, a whole host of corresponding political antagonisms spring up in the era of imperialism. In the political sphere a great rise in State capitalism and public property takes place. State capitalism grows on the one side through the entrance of the State itself into industry and finance, especially with the development of militarism; on the other side, it grows also through the most intimate fusion of the State apparatus with the private machinery of Big Business.

In the desperate struggle for self-preservation, each capitalism develops a virulent nationalism which strives for a strategic position for world power. The tremendous growth of production has now become completely fettered by national boundaries. The national State becomes increasingly a tremendous straight-jacket the laces of which have to be broken. In order to win foreign markets, colonies, spheres of influence, sources of raw materials, and advantageous possibilities for capital investments and military strategic points, and in order to prevent the competing nationalities from obtaining similar objectives, each national capitalism must develop its military and naval power to the maximum.

Mercenary armies tend to give way to the arming of the whole population and to the mobilizing of the entire nation in time of war under the indisputable control of Big Business. The pacifism of the nineteenth century Manchester School is transformed into the jingoism of imperialism. War becomes the main obsession of capitalism. All constructive forces are now dedicated to destruction and, just as it has laid its deadening hand upon inventions, thereby stifling the productive processes that may threaten its control, similarly does monopoly bring to fruition all destructive inventions and warlike preparations. War becomes the chief stimulus for industry.

As the competitive era of the nineteenth century gives way to the imperialism of the twentieth, the pressure upon the masses becomes increasingly unbearable. The United States, 1923 to 1929, well exemplified this premise, for nowhere better than in this country has the general law of capitalist accumulation been demonstrated, namely, the greater the strength and energy of capitalism the larger the unemployed and pauper armies.

The intense capitalist rationalization perfected in the United States has resulted in the following social phenomena. (1) The workers of this country suffer the highest industrial accident and disease rates of any country in the world. (2) Here the relative wage is the lowest of any industrial country, and the extremes between rich and poor are the sharpest. In 1929, in the year of highest prosperity, while over five hundred people paid income taxes on incomes over one million dollars --- a record, over 90 per cent of the people were reported to have incomes below the minimum government standards set for health and decency. (3)] Against the propaganda hailing the steady rise of real wages in America is opposed the factual increased wear and tear on the worker, the chronic unemployment and part-time work, the general lack of adequate social insurance, and the necessity to support dependents over forty years of age who can no longer work.

The rapid pace which the worker must keep up, coupled with the breakdown of family life, has led to a great increase of nervous disorders, cancer, heart trouble, etc., and to suicides. The malnutrition of the masses is well evidenced by the many deaths yearly from pellagra and, above all, from the enormous total of deaths from tuberculosis. Conservative estimates place the number of undernourished school children at six million throughout the nation.

We may sum up our estimates of the workings of capitalism even during periods of relative prosperity, whether in a state of free competition or of imperialism, by reiterating our conclusion that under imperialism all of the contradictions existing in free competitive capitalism, lead to an ever-intensifying strain upon all social relations until they reach the breaking point.

Under the laws of the accumulation of capital, periodic cycles of over- production occur, whereupon factories close down because the supply of goods on hand cannot be disposed of at a profit. If this over-production is the basic cause of any particular cyclical crisis, at the same time it is aggravated further by the forces engendered by the crisis itself. During adverse times, in order to prevent shut-downs, each manufacturer tries earnestly to lower the cost of production, that is, still further to rationalize his production and depress the wages of his laborers. It is precisely in the period of crisis that new machinery is introduced, sweatshops and over-work become general, and output enormously increased. Thus to the evils of over-work and over-strain is added the misery of unemployment and insecurity of labor.

This situation has occurred during the present economic crisis in the United States and has greatly aggravated the sufferings of the people. It may be stated that even in 1936 the equivalent to over twenty million workers are completely unemployed. In times of crises, we have not only the number of "floating, latent and stagnant" sections of the unemployed always with us, (*6) but also those thrown out of work by the crisis itself, as well as part-time workers, adults newly come of working age, women and children formerly dependent and now forced to seek work, discharged employees in domestic and personal service, and ruined sections of the petty bourgeoisie, both urban and rural. For these people, apparently it never rains but it pours.

During crises of over-production there exists, a plethora of capital; at the same time, the "little man" cannot obtain credit and is forced into bankruptcy. The large-scale operator can now buy up petty property for a song and still further concentrate and centralize his capital. The stream of bankruptcies which is always the concomitant of fluctuation on the market becomes a veritable torrent during periods of crises; yet at the exact time when the market is so urgently needed, the pauperization of the masses, both workers and middle classes, drastically undermines the market further.

During eras of imperialism, the burden of State operations rapidly increases, even in normal times; during periods of depression, the State must enter still more into the field in order to forestall impending social disasters. Thus, at the very moment when the income of the people is being sharply curtailed, the State must increase its taxation still more heavily, must raise farther its prohibitive tariffs, must augment enormously its military expenses. Increasingly dependent upon big capital for loans, the State must enlarge its budget to alleviate the social distress on the one hand, and, on the other, to try to throw its burden on the people as a whole.

During the cyclical crises of over-production, destructive forces are raised to their highest degree. Raw materials, instruments and means of production, and labor-power are wasted in wholesale fashion. All the unevenness of capitalism becomes still farther increased. Industry tries to shove the cost onto agriculture, the imperialist countries onto the colonies, the large capitalist onto the small business man, petty bourgeois, and worker.

The severe curtailment of production, coupled with the increased output per worker, leads the laborer still farther into insuperable difficulties. If even in times of prosperity the skilled workers were being reduced steadily to the rank of unskilled, now both sections find themselves out of work, including strata of the new type of petty bourgeois elements, such as foremen and technicians. If, even in good times, wage increases never kept pace with the relative increase in the mass of profit, and advances in real wages were illusory, now, in bad times, all wages are drastically reduced at the very moment when the burden upon the poor through the increase of dependents grows heavier still.

During periods of depression it is the unskilled, poorest-paid laborer who suffers most through wage cuts, speeding-up and lay-off's, and unemployment, although the skilled workers, too, feel the pinch. The fall of real wages, coming exactly at the time when unemployment is rife, causes the greatest misery among the masses. Naturally, disease, vice, and crime rates rise enormously. Prostitution and vice have gravely increased everywhere, all the more so as the depression greatly accelerates the breaking up of the family. In the United States it was reported during 1932-1933 that about a million souls in all, including whole families, had taken to the road and were traveling on the freights.

To all this must be added the story of the chronic agrarian crisis which already, even in days of prosperity, had made itself felt throughout the entire nation. In the period of 1920-1928 a great differentiation had appeared among the agrarians. On the one hand, the importance of factory farming largely increased, together with the number of agricultural laborers in proportion to farmers. Mechanization of farming grew by leaps and bounds, and production per acre and per laborer was much augmented. At the same time, however, over three million of the farm population had been driven off the farms, expropriated from any means of production.

The purchasing power of the farmer in 1929 was but 80 per cent of that of 1919. Mortgages had increased to ten billion dollars, or about 25 per cent. Tenancy had ominously advanced; peonage in fact was still rampant. Conditions among the toilers of the South and the Southwest, particularly the Negroes, were indescribable.

During the dark days of the crisis that commenced in 1929, the income of the farmers fell abysmally from a total of twelve billion dollars, high point in 1929, to about four and one-half to five billion dollars, low point. On top of this drastic fall in prices came the wide impoverishment of the farm masses due to floods and droughts and the loss of reserve capital consequent upon the widespread bankruptcy of the small rural banks upon which the farmers depended. What with the great disparity between farm and industrial prices (*7) and the actual rise in electric, gas, and anthracite rates in certain portions of the country; what with the great increase of taxes and the constantly increasing heavy debt payments that had to be made in a period of falling prices, no other outcome faced the farmer but stark ruin.

The government of the United States has attempted to stave off this wholesale bankruptcy of the agrarian. At best the efforts of the State can be but temporary. The United States is on the verge of revolutionary social consequences on the countryside.

So the industrialized countries of capitalism present their ubiquitous data for socialists while they generate spontaneous rebellions of the masses.


1. For an interesting analysis of imperialism, see V. 1. Lenin (Ulyanov), Imperialism: The Last Stage of Capitalism. L. Corey, in his The Decline of American Capitalism, reduces Marx's general algebraic formulae to the arithmetic applied to the United States.

2. H. Levy: Industrial Germany, p. 224.

3. Where a monopoly is created by fusion of a number of firms into one we have a trust. In a cartel, each concern keeps its identity. A syndicate is an intermediate form. All these forms may intertwine nationally and internationally.

4. See Chase and Schlink, Your Money's Worth, p. 31.

5. Concentration of capital is its physical growth through accumulation; centralization is its growth through transfer from the hands of many into those of a few. Centralization does not necessarily involve a growth in total social wealth.

6. See Karl Marx: Capital, I, 703 and following.

7. See G. C. Means: Industrial Prices and Their Relative Inflexibility, Senate Document 13, 74th Congress.