Like with so many other brilliant thinkers Marx‘ theories have so far been underestimated and most people only got in contact with a part of his works (his theories about society, the class struggle and his prediction of a possible future social development – the proletarian revolution) that turned out to be wrong. That’s why he was mostly overheard or not respected enough for another great work: “Das Kapital” and one of its fundamental elements, the term “Mehrwert” (surplus-value). If we would have paid accordant attention, we could have seen something that manifests itself more than ever: trying to generate new surplus-value, more and more people (mostly investor, CEOs and other wealthy and powerful people) make use of ever crueler methods, leaving more and more people job- and homeless on the street. Maybe Marx was not that wrong?
Evident is, that since the world markets have become globalized in the 1990s we are struggling from one economic crisis into the next. At the same time our (natural) environment is undergoing a scaring deterioration at an ever increasing speed (e.g. climate change). Might there be some connection between those two processes?
Understanding the mechanisms of a global economy in detail is something too big to explain it here. Nevertheless I try to explain the interplay between environmental destruction and global markets. Let’s go back to the term “Mehrwert” or surplus-value. What Marx and Engels were so concerned about is what this surplus-value exactly was and where it came from. One has to understand that Marx wrote his theories at a time that marked the beginning of the use of machines for the production of goods: the beginning of the industrial revolution.
Today, most reader won’t be so surprised by this surplus-value. We all got use to machines, to the speed of mass production and we all have heard that the best thing we can do to get rich was to accumulate money and let it work for us (in form of savings in a bank account, a property or some other assets).
What most people might not consider is that there are other, much more successful form of surplus-value generation: it is the exploitation of resources. Exploitation of natural resources without paying for them (where there are no property rights assigned – like fishing without a license or restriction of access), causing environmental degradation without paying for it, or misuse of human resources. By not paying the price the used resources are worth, a potential buyer (or producer) can achieve a surplus-value while selling a product for a cheaper price than some competitor, because of lower production costs (achieved by having someone else paying for them). In economic theory this is described as a market failure: some market actor doesn’t pay for all the costs they generate, and instead someone else is paying for the costs, usually society and/or nature. Those costs are called negative externalities.
To make an example: company CLEAN produces a product HAPPY in a country with very stringent environmental regulations. In order to produce product HAPPY they had to install a water treatment system plus a particle filter on the chimney of their factory. Company SMART wasn’t happy to produce the same product under such stringent regulations. Therefore they decided to move to another country where there happen not to exist any rules at all – or let’s say, nobody enforces them. As a result company SMART can also produce product HAPPY, but since they had very little investment costs for their factory, they can produce the product HAPPY for 20% less in production costs than company CLEAN. A third company with the name CRUEL can produce at even lower costs, because they decided to pay less than the legal wages to their employees.
I hope the reader can see the surplus-value in this example!? Well, it might be easy and not so easy to see it. As I have tried to explain above, the surplus-value that results from a product in company SMART or in company CRUEL is sort of a “negative” surplus-value. The ones that pay for it are the environment and the exploited workers.
How does this relate to Marxism and to the global financial crisis or climate change respectively? Well, economy certainly has an answer for those negative externalities described above (the internalization in the production costs) and they could theoretically be fixed (by accordant regulations and enforcement of them where they exist).
The point I want to make here is, however, a different one: surplus-value cannot be generated efficiently enough for everyone to cover a lifestyle as we have it in a modern world and in developed countries. Not unless we exploit more resources. It might have worked before, in a world in which the vast majority was poor and in which the natural environment and those poor generated the surplus-value for the wealthy.
To understand this, we have yet to make another journey in time, back to the industrial revolution at the end of the 18th /beginning of the 19th century. Try to imagine what the world map looked like: Europe was dominating more or less the planet. Thanks to Columbus and some other seafarers they had discovered new continents and made those lands and its inhabitants their slaves. They had the power to feed the developing capitalism back home with means they were stealing overseas: by exploiting other people and natural resources in the adopted lands. As a result, the surplus-value was constantly generated and capitalism was working well, all this until after the Second World War when all of a sudden world powers started to change. In the after WWII years and the early 1970s, many countries stood up from slavery and became independent. With their independence they started to get more and more hold of their own resources (unfortunately, this didn’t happen overnight), changing the world market dramatically: all of a sudden there were more people that wanted to participate in this supermarket called wealth and resources didn’t simply flow in one direction any longer.
Should it surprise us that the end of colonization, the transformation of sub-developed (ex-colonized) countries into capitalistic systems and the first global economic crisis all happened in a very short period of time?
No, it doesn’t. Not with the right understanding of capitalism. Capitalism is like a growing monster. Over time it gets bigger and bigger and the bigger it gets the more resources it eats. As long as there are enough resources, capitalism can be fed and kept tamed. But when there are no longer enough resources to feed it, the beast gets wild. And that’s what has happened during the past thirty or so years: a lack of enough new surplus-value brings economic growth to a halt, which in turn is responsible for ever less surplus-value generation.
To bring this to an end (I could certainly go on and on) I would like to come back to where I started: the lesson we could have learned from Marx. A surplus-value cannot appear out of nothing. As energy can only be transformed from one form into another but neither gained nor destroyed, so surplus-value cannot appear out of nothing. “Nothing comes for free”, as economist would say.
Our earth is a closed system with finite resources. If a growing number of inhabitants (the human species) all want a life in wealth, working less and spending more time consuming, too many resources must be destroyed to keep the engine going and enough surplus-value being generated. Capitalism might be a good form to increase individual wealth in a system with enough resources and few actors, but unfortunately it is not a system that encourages people to live moderately or to share limited resources. Rather, it encourages each member to find and create new ways to exploit ever more resources to feed the system.
Unless we start to see and understand this mechanism and change our behaviors accordingly, the world is not going to improve back to what it once was. The monster has grown too big to find sleep and it won’t rest until all resources are eaten up.