2. The Accumulation of Capital

Capital originated historically in pre-capitalist societies as money which merchants and bankers invested in trade or usury for profit. But just as the value of commodities did not fulfill its own laws until labor power became an available commodity, so too capital came into its own only as property in the means of production through which surplus value was extracted from wage laborers.

The wage relation allows for a far greater degree of exploitation than was ever possible in the past. Under previous modes of production, the surplus product appropriated by the exploiters was determined by custom as a more or less fixed amount in advance; the direct producers lived if they could on what remained. The extraction of surplus was limited by “the walls of the lord’s stomach.” The rulers would at times need to squeeze out more, but they were restricted by the danger of starving the producers and thereby halting production.

Under wage labor, in contrast, the compensation of employed producers is essentially established in advance; the bosses take what remains. Liberated from restrictive traditions, the bourgeoisie has every incentive to expand this surplus. The producers, “free” of the means of production, are compelled to work under conditions chosen by the employers. As a result, wage workers produce an enormous surplus without being entitled to any of it.

The bosses’ appropriation of surplus value makes possible the expansion of capital, and it is made necessary by the class struggle of the producers against their exploiters. For Marx:

The directing motive, the end and aim of capitalist production, is to extract the greatest possible amount of surplus value and consequently to exploit labor power to the greatest possible extent. As the number of cooperating laborers increases, so too does their resistance to the domination of capital, and with it, the necessity for capital to overcome this resistance by counterpressure. The control exercised by the capitalist is not only a special function due to the nature of the social labor process and peculiar to that process, but it is at the same time a function of the exploitation of a social labor process, and is consequently rooted in the unavoidable antagonism between the exploiter and the living and laboring raw material he exploits.(17)

The amount of surplus value extracted is the main issue in the class struggle between capitalists and workers. Capitalism expands by reinvesting the surplus value it appropriates: this is the accumulation of capital.

Relative Surplus Value

Capitalists have always attempted to squeeze more surplus value out of workers by increasing the duration and intensity of labor (Marx called this the increase of absolute surplus value). Such measures inevitably intensify workers’ resistance. The bosses’ alternative is to reduce the costs of production. In the case of materials and machines, they can try to buy these more cheaply (from other bosses under the same compulsion to lower prices). The commodity labor power, however, is “produced” by the working class; and as the proletariat becomes stronger and more organized, its monopoly of labor power drives wages up. So the bourgeoisie strives to weaken the proletariat by decreasing its role in production and enlarging the “reserve army” of the unemployed as a constant threat to replace employed workers.

“It would be possible,” wrote Marx, “to write quite a history of the inventions made since 1830 for the sole purpose of supplying capital with weapons against the revolt of the working class.”(18) Marx’s “general law of capitalist accumulation” was the expulsion of workers from the process of production.

The capitalists’ best form of “counterpressure” is to replace workers in the production process by machinery, living labor by dead labor. This not only enables the individual capitalist to employ less labor; as well, since higher productivity lowers the value of commodities, for the bourgeoisie as a whole it cheapens the goods workers need and thereby lowers the cost of labor power. This method is therefore called increasing relative surplus value. It is the characteristic form of capital accumulation, an economic mode of disciplining the working class that distinguishes capitalism from other class societies. (Of course, like all ruling classes the bourgeoisie also uses violence to keep the workers in check.)

From the standpoint of capital, the counterposition between dead and living labor depends on how capital is invested. Variable capital pays for labor power, which creates new (surplus) value for the capitalist. Constant capital buys dead labor, which transfers value already embodied in it to the new products. Constant capital further divides between circulating constant capital like raw materials, whose value is transferred whole into the commodities immediately produced; and fixed capital like buildings and machinery, whose value is subdivided among the commodities that it helps produce throughout its useful life.

The value of every commodity, therefore, consists of three components: variable capital V, paid to the immediate producers; constant capital C, paid to the owners of the materials, supplies and other means of production used; and surplus value S, the unpaid portion of living labor appropriated by the capitalist. The total value of the commodity can be expressed as C + V + S. The extraction of relative surplus value implies not only the growth of C at a greater pace than V; it also means that fixed capital grows most rapidly.

There is a further distinction to be made. Marx divided production into two departments, Department 1 for producers’ goods and Department 2 for consumers’ goods. The output of Department 1 re-enters production as constant capital; the output of Department 2 becomes variable capital. So the advance of productivity, the expansion of constant capital ahead of variable capital, implies also that Department 1 expands more rapidly than Department 2.

The inherent drive for capital accumulation, taking the form of the relative increase of surplus value, is the key to the immense expansion of capitalism. And once the accumulation of relative surplus value begins, its continuation is forced on the bourgeoisie by the internal pressure of competition. In 1847 Marx and Engels wrote in the Communist Manifesto that “the bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.”

The reverse side of this achievement is that labor is condemned to enslavement by capital. The “equal exchange” of labor power for wages allows the capitalists to appropriate surplus value without returning an equivalent. It results in vast inequalities between classes (and within them); capital accumulation only intensifies the disparity.

Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, and moral degradation at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital.(19)

Concentration and Centralization

It is often stated by Marxist as well as bourgeois theorists that the motivation driving the individual capitalist is to maximize his rate of profit. But this, like the goal of extracting the maximum of surplus value, is only a means to the real end. As Marx put it, the “aim [of the capitalist mode of production] is to preserve the value of the existing capital and promote its self-expansion to the highest limit (i.e., to promote an ever more rapid growth of this value).”(20) This aim, we shall see later, is counterposed to capitalism’s “tendency towards absolute development of the productive forces, regardless of the value and surplus-value it contains ...”. That is, capitalism strives to expand the value form even at the expense of developing use values. The conflict of these tendencies, the most visible expression of the contradictions of value, is the key to the analysis of capitalism’s crises.

Accumulation occurs both through the of concentration of capital – the growth of individual capitals through reinvestment of their own surplus value – and through the centralization of capital in the hands of fewer and fewer capitalists who take over the property of others. The weaker capitalists who are unable to expand or modernize rapidly enough are driven out of business and expropriated by the stronger. (The two terms here are defined in Marx’s sense, which is not identical with common usage today.)

Several dangers for the bourgeoisie are inherent in both aspects of accumulation, aside from the obvious destruction of capitalists. One is that accumulation is accompanied by periodic crises that weaken the masses’ confidence in the rulers’ ability to run society. Another is that expansion devalues capital and thereby counters the bourgeoisie’s goal of expanding its capital. Linked to both of these is the increasing concentration and organization of the proletariat, unified and strengthened by capitalism’s socialization of labor – a threat to the very existence of capitalism. Here is Marx’s summary of the process, a concise dialectical masterpiece:

As soon as this process of transformation has sufficiently decomposed the old society from top to bottom, as soon as the laborers are turned into proletarians, their means of labor into capital, as soon as the capitalist mode of production stands on its own feet, then the further socialization of labor and further transformation of the land and other means of production into socially exploited and therefore common means of production, as well as the further expropriation of private proprietors, takes a new form.

That which is now to be expropriated is no longer the laborer working for himself, but the capitalist exploiting many laborers. The expropriation is accomplished by the immanent laws of capitalistic production itself, by the centralization of capital. One capitalist always kills many. Hand in hand with this centralization ... develop on an ever-extending scale the cooperative form of the labor process, the conscious technical application of science, the methodological cultivation of the soil, the transformation of the instruments of labor into instruments only usable in common, the economizing of all means of production by their use by combined, socialized labor, the entanglement of all peoples in the net of the world market, and with this the international character of the capitalist regime.

Along with the constantly diminishing number of the magnates of capital, who usurp and monopolize all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working class, a class always increasing in numbers and disciplined, united, organized by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with and under it. Centralization of the means of production and socialization of labor at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.(21)

In brief, the bourgeoisie’s development of the productive forces sets in motion its own destruction. Marx’s summary elegantly amplifies the contradiction between the social character and private relations of capitalism. It also brings out the centrality of the proletariat for socialism. Not only is the workers’ struggle the driving force for capitalist development; not only is their exploitation the potential spark for revolution; but the proletariat’s own development and struggle under capitalism organizes it and teaches it the essence of collective and even international production. Capitalism thereby creates the class that becomes the creator of the highest mode of production, communism.

“Capitalist Communism”

The accumulation process brings about an extension of the law of value whose absence is sometimes used to argue that Stalinist countries cannot be capitalist. It therefore warrants attention.

For a given capital, its rate of profit is the ratio of the surplus value extracted to the capital invested.(22) This definition in value terms underlies but is not the same as the profit rate that capitalists actually receive in monetary terms. The rate of profit received is the basis of a capital’s ability to accumulate and survive. In particular, a capitalist with a profit rate significantly below average in his sphere of industry would have difficulty obtaining investments and loans; if the situation persisted he would soon be out of business.

Between different spheres the situation is parallel. If one industry is highly profitable at the moment (because of enlarged demand or increased productivity due to new technology, for example), then it attracts investment and spawns new firms. As production in this industry increases, its market eventually becomes exhausted; then profits decline and investment begins to move elsewhere. Hence there is a tendency for rates of profit received to equalize at the average rate of profit. It depends on the fact that capitalists are interested in the expansion of their capital, not in the particular spheres in which they have momentarily invested.

This equalization tendency was used by Marx to explain an apparent problem in his theory of value. The replacement of living by dead labor in accumulation is an uneven process: some firms advance more rapidly than others. Within the same sphere of industry, productivity may vary among different capitals; the value of the commodity produced (its socially necessary labor time) is determined by the dominant level of productivity. But between different industries, different levels of productivity affect not the values of commodities but rather their prices.

Capitals in different industries (even if equally up-to-date) will normally differ in the proportion of machinery to labor employed. In value terms, Marx called the ratio of constant to variable capital the organic composition of capital. While the organic composition tends to vary between spheres, the rate of exploitation (or rate of surplus value), which measures surplus value against the variable capital that produces it, tends to be roughly equal.

Now comes the difficulty. Since only living labor produces surplus value, a capital with a high organic composition uses relatively little living labor and therefore produces a below-average amount of surplus value. Therefore its rate of profit (in Marx’s sense) would also be below average. If the profit a capitalist received were the same as the profit he extracted, the most advanced firms would receive the lowest profit rates, and the system would be unstable.

The market for capital ensures that capitalists do not receive profit simply according to the surplus value produced by their own workers. On the contrary, the tendency for profit rates to equalize makes the bourgeoisie as a whole – in effect, as a single total capital – share the total surplus value in proportion to the value of each individual’s invested capital, variable and constant together. Marx ironically labelled this tendency “capitalist communism”.(23) It is a further illustration that the bosses as a whole exploit the workers as a whole, not just their own employees.

The result of the equalization of profit rates is that capitals with high organic compositions (and therefore low rates of profit in terms of value produced) appropriate more surplus value than their workers create, in order to obtain (“realize”) the average rate of profit. Reciprocally, other capitals with lower organic compositions receive less surplus value than their workers produce, but they still obtain an average rate of profit. Marx called the resulting revised exchange value of each commodity its price of production; it is calculated as the cost of production (the paid portion of variable capital plus the constant capital it embodies) plus a proportionate share of surplus value. A commodity produced with a higher than average organic composition of capital has a price of production higher than its actual exchange value.

The dividing and sharing of surplus value take place through the constant daily haggling over markets, prices and credit. It is clearly a long-term process: capitalists cannot shift their investments immediately. Those who try to move their capital face serious obstacles: capital is tied up in buildings, materials and instruments, etc. And as the relative size of fixed capital tends to increase, the process of equalization becomes even slower. Marx comments, “Under capitalist production, the general law acts as the prevailing tendency only in a very complicated and approximate manner, as a never ascertainable average of ceaseless fluctuations.”(24)

One consequence of this “equality” among capitalists is unequal exchange between industries and even countries. In trade at prices of production between an advanced producer (with a high organic composition) and a more backward one, there is a transfer of value from the backward to the advanced – since the advanced producer’s commodity sells at a price above its value and the backward producer’s commodity sells for lower. This is a “lawful” way for economically advanced countries to benefit disproportionately from trade with their colonies and dependencies.

The equalization tendency of individual profit rates based on the market for capital illustrates capitalism’s unique combination of rationality and irrationality. On the one hand, it allows the system to expand, since without it a capitalist who tried to advance technologically would only receive the low proportion of surplus value directly produced. On the other hand, it makes exchange value diverge more and more from the value underlying it, so that bourgeois society is less and less able to quantify scientifically its own inner workings. This is one reason why value can only be measured indirectly through the unstable money commodity and cannot be calculated directly in terms of labor time. It also shows more deeply why private (in the sense of separate) ownership stands in contradiction to social production: privately owned capitals require (and, in tendency, obtain) their “fair share” of the social surplus value, whether or not such a distribution corresponds to the interest of society – even bourgeois society – as a whole.

Some theorists criticize Marx for giving an erroneous solution to the so-called “transformation problem.” They hold that Marx’s replacement of exchange values by prices of production is based on the assumption that each round of production begins with pure exchange values; therefore he is wrong not to notice that production costs, as much as output, have to be measured according to prices of production.(25) But Marx was perfectly aware of this; he warned of “the possibility of an error if the cost-price of a commodity ... is identified with the value of the means of production consumed by it.”(26)

The confusion is partly due to Marx’s use of the term “value” to mean exchange value. Exchange value is already an expression of value in monetary form; the price of production is only a modification of exchange value after profit rates have been equalized. The “transformation of values into prices of production” is not a change between categories (value to price) but an adjustment within one category – exchange value. The error Marx cited is avoided if the initial cost-prices (“values”) of commodities are understood to be the production prices (modified exchange values) as they stand at the start of the production period. (The same holds for the organic composition of capital.)

The real problem is that Marx’s critics interpret him as trying to devise a formula for a rational price system. But as we have seen, the purpose of his elaboration of the law of value was to discover capitalism’s long-term laws of motion and demonstrate its impermanence.

Another confusion is that the equalization of profit rates results from a constant “migration” of capital away from spheres of industry with high organic composition of capital to low organic composition spheres. As we will see in Chapter 5, this convinces some that capitalism does not exist in the Eastern bloc. But it is just an extension of the notion that Marx failed to solve the transformation problem.

First of all, the history of capitalist development shows the opposite: capital does move between spheres, but it tends to go to the more advanced – otherwise there would be no technological progress. (The movement of capital between countries in search of higher profits does not contradict this argument. When capital moves to an economically backward country having a high rate of profit because of low wages, this amounts to taking advantage of a higher rate of exploitation – whereas Marx assumed that in a given society the rate of exploitation was uniform. It therefore has the effect of raising the overall rate of profit; it is a separate process from the balancing of the rate of profit between firms.(27))

Secondly, the migration notion assumes that capitalists first appropriate “their own” surplus value based on a pure value calculation, and only later discover through competition that their share is disproportionate. But modern capitalists have never appropriated profits according to pure value. (Conceivably pre-capitalist commodity producers could be said to exchange according to values – but before labor power was a commodity, abstract labor and therefore value could not be measured.) Once capitalist production has been established, there is no reason for the most profitable firms in any cycle of investment to be those with low organic compositions. Momentary profitability can be due to many factors, even accidental ones.

The migration theory mixes up different levels of analysis. Calculation in terms of values was Marx’s first approximation to reality, with capital treated as a unified whole. The second approximation, capitalist communism, shows how profit rates equate at the level of competing capitals. It is the extension of the law of value from commodities to capital: the capitalists get equal returns on their outlay – not of their own labor but of their capital. The price of production of a commodity, the modified reflection of its value, depends not simply on the characteristics of its production in isolation but rather on its production as a product of a certain sphere of capital in relation to every other sphere.

Although capitalist communism seems to deny the law of value for commodities, it is a further “violation” of the law of value on the basis of that law itself. As Marx noted, “how little the determination of value ‘directly’ counts for in bourgeois society” – its effects are indirect and unconscious.(28)

The rate of profit produces an illusion: the productive capacity of living labor appears instead to be the productive capacity of capital; surplus value created in production appears instead to be profit generated on the market. Bourgeois and middle-class theorists do not invent their illusions out of nowhere; they merely invert form and content, presenting as the product of science what appears on the surface of capitalist relations and in the consciousness of the capitalists.

Marx criticized capitalists as well as the “bourgeois theorists, the political economists,” for allowing the formation of the general rate of profit to obscure the origin of surplus value in the exploitation of labor. “This confusion of the theorists best illustrates the utter incapacity of the practical capitalist, blinded by competition as he is, and incapable of penetrating its phenomena, to recognize the inner essence and inner structure of this process behind its outer appearance.”(29) Little needs to be added today except that the “political economists” now call themselves Marxists.

The Question of Competition

The most common misrepresentation of the law of value concerns the drive behind capitalist accumulation. Middle-class theorists stress the desires of individual capitalists and their competition in the market, rather than the interest of the bourgeoisie as a whole to resist the class struggle of the workers. The position is most convenient for those who deny the existence of capitalism in the USSR, where market competition between enterprises is limited.

For example, Mandel writes: “It is competition that determines the whole dynamic, all the laws of development, of capitalism.”(30) More explicitly:

What causes capitalist society to move? Competition. Without competition there is no capitalist society. A society where competition is radically or completely eliminated would no longer be capitalist to the extent that there would no longer be a major economic motive for accumulating capital and consequently for carrying out nine-tenths of the economic operations which capitalists execute.(31)

The notion is so pervasive that Tony Cliff, who calls the Stalinist system capitalist, argues similarly:

While in the traditionally capitalist countries competition between different factory owners causes them to accumulate and increase the organic composition of capital, in Russia this factor does not exist at all as the factories are owned by one authority.(32)

Likewise, Baran and Sweezy, who hold that Marx’s attitude toward competition is out of date, use the standard assumption about competition to discredit the relevance of Marx’s whole analysis of capitalism:

The stagnation of Marxian social science, its lagging vitality and fruitfulness, cannot be explained by any simple hypothesis. ... But there is one important factor ... the Marxian analysis of capitalism still rests in the final analysis on the assumption of a competitive economy.(33)

Some even think that competition produces the law of value itself:

This competition between individual capitals generates the law of labor value and constitutes the driving force for the historic process of capital accumulation.(34)

Thus the dominant opinion among a wide variety of Marxists is that competition is the starting point for the analysis of capitalism. Such theorists often turn for textual support to Marx’s Grundrisse, an important work containing his private notes written in preparation for Capital. Several of its formulations are mistakenly seized upon as authorization for the line that competition is fundamental. Here is a common citation:

In competition this inner tendency of capital [the drive to expand beyond all bounds] appears as a compulsion exercised over it by alien capital, which drives it forward beyond the correct proportion with a constant March, March! ... Conceptually, competition is nothing other than the inner nature of capital, its essential character, appearing in and realized as the reciprocal interaction of many capitals with one another, the inner tendency as external necessity. Capital exists and can only exist as many capitals, and its self-determination therefore appears as their reciprocal interaction with one another.(35)

It is easy to read “competition is nothing other than the inner nature of capital” as an assertion by Marx himself that competition is the essence of capitalism. But the passage doesn’t say that; it says that competition is the appearance of the inner nature of capital. What this inner nature is we have already seen: the drive to accumulate, the struggle between capital and labor, at bottom the exploitation of proletarians through the wage system. The passage illustrates again the distinction between appearance and essence. In everyday language the term is easy to overlook, but when Marx wrote “appear” three times in a few lines he meant it. Reading the passage over as a picture of the surface appearance of capitalism reveals clearly what he had in mind, if we understand that for Marx “appearance” is not a mirage but a subordinate aspect of reality.

As for the “capital exists and can only exist as many capitals,” Marx meant that capital is based on value, which presupposes commodities produced for exchange. Hence one capital can exist only in relation to others. Leftists typically read this as meaning that state capitalism is theoretically impossible. For example:

Capital is a concept whose development and functioning are governed by certain laws, i.e., it has a logic. We will argue, along with Marx, that “state capitalism” ... is incompatible with Marx’s analysis of capitalism. The pivotal point ... is comprehending why 1) Capital can only exist as many capitals, and, 2) Competition is the ‘inner nature of capital.’ These two closely related characteristics obviously exclude the possibility of one state-capital.(36)

But Marx never argued that state capitalism is impossible (we will see in the next chapter that he and Engels believed quite the opposite) – only that separate state-owned capitals must produce for, exchange with and confront one another. Indeed, in its ordinary activity capital needs to take the form of “many capitals,” with competition between them, precisely in order to get rid of its inefficient sectors in times of crisis. Monopoly and statified capitals face the same need, but since they interfere with the “automatic” operation of capitalism’s laws they have a harder time disposing of backward sectors. The current efforts to “reform” Stalinist economies by giving competition freer rein show once again that competition is a necessary but subordinate category.

A second passage in the Grundrisse is even sharper:

Competition executes the inner laws of capital; makes them into compulsory laws toward the individual capital, but it does not invent them. It realizes them. To try to explain them simply as results of competition therefore means to concede that one does not understand them.(37)

Marx differentiated between the drive to accumulate, which he termed an “immanent law of capitalist production” or the “inner nature of capital” – and its surface manifestation in the form of competition between capitals. The manifestation is perfectly real: individual capitalists, especially smaller ones, feel the pressure to modernize and accumulate coming from competition, for their rivals are constantly threatening to undercut them by producing cheaper commodities. Capitalist A does not say to himself, “Now that I know how the system works, I will invest in new technology to accumulate capital and deepen the exploitation of the working class so that capitalism can survive.” No, he thinks instead, “Capitalist B is getting new machines to drive me out of business, so I too had better lower my labor costs in the same way.”

Competition is precisely the operation of surface pressure to enforce the inner laws on the capitalists: it is capitalism’s value-policing agent. But it is not the fundamental drive for accumulation. If it were, it would not tend to heat up during the phase of the business cycle when the pace of accumulation declines and recede when accumulation accelerates (see the section on crises below). As Marx noted:

It is easy to develop the introduction of machinery out of competition and out of the law of the reduction of production costs which is triggered by competition. We are concerned here with developing it out of the relation of capital to living labor, without reference to other capitals.(38)

Yet another passage from the Grundrisse has been cited to argue that the USSR cannot be capitalist without competition: “production founded on capital ... posits itself in the forms adequate to it only insofar as and to the extent that free competition develops.”(39) This “quotation” deceptively omits the crucial words “for the first time” in the middle of the phrase, a clue to the fact that for Marx “free competition” is just one stage in the history of capitalism, an idea to be developed fully in the next chapter.

Competition and Value

Let us look at the standard error on competition from a different perspective. The underlying laws of capital (value, accumulation) operate at the most abstract level of “capital in general,” where the struggle between capital and labor is considered in abstraction from conflicts within the bourgeoisie. On the other hand, the effects of competition operate at the level of “many capitals,” where fundamental laws are imposed upon the representatives of capital.(40) Marx used the method of successive approximation to social reality in order to strip away the different layers of appearance and thereby lay bare the inner relations of the system. The misrepresentation of competition amounts to mixing up these two levels, in effect omitting capital in general in favor of the relations between individual capitals. This can be seen in a particularly bald formulation by a co-thinker of Tony Cliff’s:

Marx distinguishes between ‘capital in general’ and ‘many capitals.’ The former is the exploitative relation between labor and capital, the latter the competitive interaction of individual capitals. The theory of value is especially concerned with relations between ‘many capitals,’ since it is competition which compels firms to sell commodities at the socially necessary labor time required to produce them.(41)

If this were true it would be hard to see how Marx was able to analyze value so thoroughly in Volume 1 of Capital, which stays at the level of capital in general and barely mentions competition. Indeed, answered the Cliffites in advance:

Competition merely expresses as real, posits as an external necessity, that which lies within the nature of capital; competition is nothing more than the way in which the many capitals force the inherent determinants of capital upon one another and upon themselves. Hence not a single category of the bourgeois economy, not even the most basic, e.g., the determination of value, becomes real through free competition alone ...(42)

Cliff’s conception of competition as the essence of capitalism is fundamentally the same as that of the non-capitalism theorists of the USSR (Mandel, Sweezy, Shachtman, et al). As we noted in the introduction, he holds that since wage labor in the USSR is not a commodity, the capitalist laws of motion operate only because they are imposed from outside by military competition. But he goes further: in Soviet society, he claims, the accumulation of value is not the goal of production; on the contrary, “Russia’s competition with the rest of the world is expressed by the elevation of use values into an end ...”.(43)

Of course, each capitalist firm and state requires specific use values, but Cliff’s reasoning elevates this elementary fact into a principle that effectively throws out the Marxist analysis of capitalism. Moreover, he applies this logic not just to the USSR but to capitalism in general:

Competition between the capitalist powers has reached the stage where the international division of labor is disrupted and competition through buying and selling is replaced by direct military competition. Use values have become the aim of capitalist production.

It would seem that for Cliff competition is so powerful that it has altered the drive to expand value as the motive force of capitalist production. Not only is Cliff’s USSR really a third social system, different in essence from capitalism; he also says in effect that modern capitalism as a whole is also not really capitalist. This goes to show that theorists who deny that Stalinist society is capitalist have no monopoly on turning Marx inside out and removing the capital/labor relation from its central position. State capitalists do it too, under the common assumption of middle-class Marxism that the law of value derives from exchange, not production.