Even though most of us engage in eco­nomic activ­i­ties on a daily basis, few of us actu­ally under­stand the system.

Of course, since the global cri­sis we’ve seen a lot of pub­li­ca­tions on the fail­ures of cap­i­tal­ism and how we could repair, improve, and per­haps replace it. But before think­ing about what could be changed in order to improve upon the cur­rent con­di­tions, we have to under­stand how our cur­rent eco­nomic sys­tem actu­ally works.

And while we’re all taught the neo­clas­si­cal under­stand­ing of eco­nom­ics from pri­mary school onwards, to me it seems few of us actu­ally posses the knowl­edge to crit­i­cally assess its short­com­ings. In an attempt to facil­i­tate such an assess­ment, I try to clar­ify some of the main prin­ci­ples in the cur­rent eco­nomic system.


The image above illus­trates the gen­eral prin­ci­ple of cap­i­tal accu­mu­la­tion (click on it for larger ver­sion). Read­ing from left to right, we see a prod­uct being pro­duced and sold in the way we are famil­iar with. In order to pro­duce any object, labour (1) has to meet with mate­ri­als (2), includ­ing means of pro­duc­tion, in a pro­duc­tive envi­ron­ment (3). So far, so good.

But then some­thing extra­or­di­nary hap­pens: sur­plus value (4) is cre­ated. Or actu­ally, it just comes into being. So when we look at the final price of the prod­uct we just pro­duced, it con­sists of the price of pro­duc­tion (5), which includes mate­r­ial resources, labour, means of pro­duc­tion, and what­ever extra ser­vices you can think of, and a profit (6).

At this point, most read­ers will say: “Yes, of course, this is how it works. One who cre­ates some­thing, should be allowed to profit from engag­ing in that activ­ity”. I want to stress here that the price of pro­duc­tion already included a fee for the pro­ducer, which means the profit is basi­cally equal to the sur­plus value that came falling from the sky before. If we keep in mind that con­cepts like wage labour, profit, sur­plus value, and alike are all human inven­tions, one can seri­ously ques­tion the valid­ity of this ‘profit’ thing.

But once this profit has been gen­er­ated, where does it lead to? Well, now we’re touch­ing on the core of cap­i­tal­ism. Profit, as you might remem­ber from your high-school eco­nom­ics class, is used to invest. Invest in new means of pro­duc­tion, expand­ing pro­duc­tion capac­ity or research and devel­op­ment. Regard­less of its direct appli­ca­tion, the final goal is to apply this profit to gen­er­ate more profit: accu­mu­la­tion for accumulation’s sake.

While of course not all busi­ness is as strict about it as could be, the thing that wor­ries me most is the fact that this process of profit gen­er­at­ing and invest­ing in means of pro­duc­ing more profit (accu­mu­la­tion for accumulation’s sake) is com­pletely accepted by mostly every­body, every­where. While this process of accu­mu­la­tion is com­pletely based on human con­cepts, we tend to think of it as a nat­ural way of relat­ing to one another. For me, real­is­ing that words like profit and sur­plus value are merely human con­cepts is the first step in under­stand­ing the cur­rent sys­tem, and ulti­mately find­ing alternatives.

fur­ther reading:

  • Grae­ber, David. Debt: the first 5000 years. New York: Melville House Pub­lish­ing, 2011
  • Har­vey, David. A Com­pan­ion to Marx’s Cap­i­tal. Lon­don: Verso, 2010
  • Har­vey, David. The Lim­its of Cap­i­tal. Lon­don: Verso, 2006

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on Contact

2021-09-28 22:54:18

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on 12+ h. a day, 6/7 days a week

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on Survey

2015-04-01 13:27:31

[…] the spon­ta­neous responses to the last ques­tion of the sur­vey car­ried out in […]

Conrad Newel

on 12+ h. a day, 6/7 days a week

2015-03-23 18:10:56

@Colt Sievers I will be the first to agree with you on all counts. I would love to read that article. If you ever want to publish it on my blogg please do not hesitate to contact me.

Colt Sievers

on 12+ h. a day, 6/7 days a week

2015-03-23 16:58:10

@Conrad having worked in one of those offices that you mention, I have found your post as much provocative as naive and simplistic. I should make an entire post to explain why... will leave that for later. Thanks, anyway, to keep the discussion alive