1. A rapid overview of 250 years of modern Capitalism
From the Industrial Revolution to the End of the twofold Bipolarization of the World
The period from the second half of the 18th Century to the First World War constitutes a turning point in the world’s economic history. The industrial revolution that is born in England spreads to Western Europe and the New World: North America, Australia and New Zealand. Some germs are also disseminated in certain other countries of the Americas, who had gained political independence in the early 19th Century – Argentine in particular. Then come Russia and Japan.
These countries, which held only 20% of the world’s manufacturing production in 1800, concentrate nearly 80% of it in 1913. In other words, the first arrivals have taken the benefits of the industrial revolution at the expense of the rest of the world. This economic gap attains its maximum during the inter-war period. It is the result of a predatory colonial policy that deindustrializes the colonized countries. In effect, while it is very limited at the beginning of the 19th Century, colonization reaches its apogee on the eve of the first worldwide conflict.
This formidable concentration of wealth at one pole of the planet configures a first geo-economic bipolarization between a few industrialized countries and the rest of the world. In other words, while capitalism exercises its domination over all continents in 1913, it is still far from having developed everywhere. It was not until the end of the ‘Thirty Glorious Years’ and the ‘Cold War’ that it spread geographically throughout the world in a significant way, especially in Asia, but also in Africa, where some countries begin to experience very significant growth since several years. (1)
From the middle of the 18th Century, Great Britain occupies a prime position as an early laboratory of this dynamic: as the cradle of modern capitalism (2) and of political economy, this country dominates the world until the last third of the 19th Century, gradually giving way to the United States of America and to Germany on the European continent. In this context of overwhelming power of a few imperial economies, no country can claim real independence, not even those in South America who formally had already emancipated from their colonial tutelage. It is the extroverted economic logic of capitalism – that is, of a system that structurally needs to extend its sphere of valorization geographically and sector-based – which will be at the basis of this colonial and then warlike competition between the first industrialized countries. This imperial competition constitutes the framework of a second bipolarization of the planet, which is superimposed on the first. The Cold War is the ultimate outcome of this configuration, a total nuclear war that, albeit it has remained only a potential one, has generated multiple local hot wars that have claimed as many victims as the second imperialist planetary conflict.
The first bipolarization is essentially of an economic order; it separates a few early industrialized and rich countries from the – extremely poor and dependent – others, known as the Third World. The second one is mainly geopolitical and pits constellations of countries against each other who are competing for continental or planetary domination: the Triple Entente and the Triple Alliance, who confront each other since the end of the 19th Century in order to lead to the First World War; the Axis countries opposed to the Western bloc during the Second World War; the Soviet and the American bloc during the Cold War.
By loosening this double bench-vice of economic and geopolitical bipolarization that organized the world since the 19th Century, the end of the ‘Thirty Glorious Years’ (1975) and of the ‘Cold War’ (1989) allowed many countries to become autonomous and take off in
an increasingly reunified economic world a multi-polar world that is starting to rebalance itself economically. This dynamic is developing all the more easily as the United States are losing ground to the point of being bitten in the tail by a China that has set itself the objective of disputing the former’s world leadership is setting itself the goal of disputing the world leadership, both economically and geopolitically.
However, such a configuration is not likely to continue because a “pacified” multi-polar world operating within the framework of multilateral agreements is an illusion. Increasing economic competition, the nationalist-protectionist tendencies of populist governments, the imperial aims of each nation, the relentless defense of American leadership and the contesting thereof by many countries gather all ingredients to create a new planetary wrench on the ground, in the air and in cyberspace.
The four times of the power relations between the classes
By dividing total profits by total wages, Marx constructs a measure of the economic rate of exploitation of the wage earners. (3) Its evolution over two centuries of modern capitalism illustrates his thesis that “The history of any society up to the present day has been nothing but the history of class struggles” very well. (4) (Graph 1.1). In effect, four main times give rhythm to its evolution in function of the power relations between the classes.
The first high point corresponds to savage capitalism and extends from the Industrial Revolution to the middle of the 19th Century. Numerically still weak, illiterate, poor, weakly organized and facing increasing unemployment, the wage earners of that time have little capacity to offer a sufficiently consequent resistance to attenuate the shameless exploitation of their labor force by the new entrepreneurs of the Industrial Revolution. It is a period during which the English ruling class amasses fortunes, multiplying the rate of surplus value of the wage earners by 1.86, from index 100 to index 186 between 1760 and 1855. As profits are abundant in a context in which investments are still modest, profit rates are high. (5) This first century of savage capitalism exacerbates economic and social inequalities and allows a small minority of entrepreneurs to capture a growing share of the wealth produced on the basis of a fierce exploitation of pauperized wage earners.
The second high point extends from 1855 to the Russian revolution of 1917. (6) The English working class, which had become more numerous, better educated and organized, for the first time in a century, succeeds in imposing a progressive increase in real wages during the following half-century (from 1855 to 1901; see Graph 2.1 on the next page) and in securing some legal advances in the social sphere. This explains the capping of the rate of surplus value between 1855 and 1872, and its subsequent, slow decline until 1895. If it hence recovers strongly, this is following a violent counter-offensive by the English bosses to take back what had been conceded to the wage earners. As a result, the overall increase in the rate of surplus value over the half-century preceding the conflict is much lower than during the century of savage capitalism when it almost doubled.
The third high point in the power relations between the classes begins with the year of the takeover of power by the Workers’ Councils in Russia in 1917, and extends until the end of the glorious thirty years. If the exploitation rate of the wage earners has more than doubled throughout the first century and a half of capitalism, 1917 marks a turning point since this rate was reversed during the following sixty years: the index of the rate of surplus value diminishes strongly from 258 in 1917 (or 211 in 1919) to 142 in 1974. This downward turn of the rate of exploitation of the wage earners is the result of the wave of revolutions and large-scale social movements that develop to put an end to the horrors and massacres of the World War and to show solidarity with the Russian revolution.
The fourth and final high point begins at the end of the ‘thirty glorious years’, when the power relations between the classes reverse once again in favor of a ruling class that arrives at raising the exploitation rate, up to the present day. This reversal is the result of a combination of factors, in particular the rise of unemployment since 1974, which undermines the wave of struggles that began in the mid-1960s and that is exhausted at the end of the 1970s.
What are the driving forces behind all these dynamics of wealth accumulation, of geographical and sector-based extension of capitalism, of imperialist relations, of economic crises, of social conflicts, and what are their evolution over two centuries and a half of modern capitalism? Are they carried out according to the modalities of the analysis traced by Marx in ‘Capital’ ? Does the 20th Century confirm or contradict his analysis since the rate of surplus value is almost halved over the sixty years from 1917 to 1974 (from index 258 to 142)? Among others, these are the main questions that motivate us in this first exercise of illustrating and deepening his work. (7)
M.R. August 10, 2019
Latest corrections and updates: August 12, 2019; October 30, 2019.
1 This subject will be dealt with in the final chapter.
2 “…as is shown by the fact that with the crisis of 1825 it for the first time opens the periodic cycle of its modern life”, Afterword to the Second German Edition of Capital (1873).
3 As this fraction increases, the exploitation rate increases and inversely. In effect, in the annual total of created wealth (the Net
Interior Domestic Product or NDP), the exploitation rate (which Marx called the rate of surplus value) measures the part that falls to the employer (the profit or surplus value) and the part that falls to the wage earner (i.e. his wages). In other words: the Rate of Surplus Value = Surplus Value / Wages = (NDP – Wages) / Wages. This measure of the degree of economic exploitation of the wage earners has to be distinguished from the degree of physical exploitation, like the work stress or the risks of the work. Its statistical calculation since 1760 until recently is provided in the Annex on the data and on methodology.
4 The first phrase of the Communist Manifesto by Marx and Engels (1847).
5 The profit rate is the ratio between the obtained profits and the total investments consented to obtain these profits.
6 The magnitude of the rate of surplus value in 1917 seems exceptional, even overestimated. It is however consistent with what can be observed in times of war, at least at the beginning of a conflict (a lowering of real wages and an increase of productivity gains). Nevertheless, we prefer to rely on the data of 1913 and 1919 to calculate the evolution of the rate of surplus value before and after the war, because the data between 1914 and 1918 may be less certain or overestimated. However, the year 1917 remains politically and socially very significant as a turning point in the evolution of the rate of surplus value.
7 This contribution therefore has only a limited objective, which complements Marx’s Capital and the more qualitative works of Marxist and other historians of the Industrial Revolution and the development of Capitalism; works to which the reader should refer in order to obtain a complete vision.