As may be gleaned from our review of Engels’s 1895 Introduction to The Class Struggles in France, the “errors” which Engels confessed had been committed by Marx and himself and the additional errors that we listed earlier were due to the lack of the kind of political theory that Marx’s critique of capitalism contained implicitly, but one that Marx failed entirely to develop. What we are saying is that the “errors” that Marx incurred in the application of his theory of capitalism to the political events occurring in his time were not due to any corresponding “errors” in the theory itself, but rather to the application of the theory that Marx carried out. The reasons behind Marx’s erroneous application of his theory of capitalist industry to the society of capital – his failure to develop a political theory apposite to capitalist industry as social capital – can be attributed to his inability to see that capitalist industry is only a part of the society of capital, but not its entirety! Furthermore, had Marx extrapolated his theory of capitalist industry to the social and political developments implicit in that theory, he may have been able to predict political developments in the society of capital of equal foresight and importance to those that he successfully predicted regarding the evolution of capitalist industry and finance itself!
Of course, whilst it may be fair to upbraid Marx for unduly extending his theory of capitalist industry to capitalist society overall, and therefore incurring the “errors” that Engels pointed out, we are much less entitled to chastise him for failing to extrapolate from the capitalist society that he confronted in his time to the kinds of developments that took place after his, and indeed after Engels’s, time. The first mistake Marx made was to believe that the class antagonism of capitalist society was a magnified yet exact replica of the antagonism between workers and capitalists inside the factory walls. In other words, Marx failed to see that the kind of politics that pertain to the labour market and to the labour process is not the same as the politics that applies to the entirety of capitalist society. Capitalist industry is not confined to the factory walls! Capitalist industry requires for its existence, reproduction, and expansion a society of capital that comprises at least those elements of social life that precede the birth of capitalist industry and – much more important perhaps – social features or resources that go beyond the boundaries of the particular society in which a specific capitalist industry is first located and develops.
We cannot stress these elements strongly enough. What we are contending is that Marx confined his analysis of capitalist social relations of production to the very restricted realm of the labour market and of the labour process – to what we may call loosely “industrial relations”. And from these industrial relations Marx then presumed to extend the same kind of “politics” to the entirety of the society in which capitalist industry first originated and developed – without regard to the fact that this society is a far greater entity, both in size and reach and political significance, than the more limited sphere of worker-capitalist or factory relationships! It is possible, for instance, to have an authoritarian workplace, on one side, within a democratic society on the other side! Conversely, it is possible for a society of capital to display more representative features within the factory walls, in its industrial relations, and entirely authoritarian and even despotic structures at the broader political level.
Simply and curtly put, Marx failed to see that capitalist industry (including finance capital) and the society of capital are not necessarily one and the same thing! Marx’s greatest error was to reduce all social relations required by capitalism – in other words, the social relations of production required by capitalist industry – to the narrow confines of the social relations that obtain inside the workplace. Marx mistook bourgeois society for a factory-society, as if the factory could extend seamlessly to the rest of society and cover it entirely. – Whereas in fact we know that for this to occur the capitalist factory must first rely upon and gradually transform the rest of the society in which it operates to its image and likeness, to “the society of capital”, without ever succeeding in this process of assimilation and integration because it is impossible for capitalist social relations of production to swallow all social relations. It is entirely fair to claim that Marx’s theory and critique of capitalism remained wholly locked inside the factory gates!
Capital is continually expanding and can never be static without abolishing itself – it is “value in motion”. Consequently, capitalist social relations of production always require use values – first among them a “reserve army of unemployed” - that lie outside of the circulation of capital. In his effort to theorize capitalist social relations of production, Marx reduced human society to the factory precinct and forgot entirely that capitalist industry is only a part – yes, the vital part, but still only a part – of the society of capital but not its entirety! Capitalist industry requires for its simple reproduction, and especially for its expanded reproduction, the existence of areas and regions of social life that are not yet subjected to its “social relations of production”. This ought to have been obvious to Marx; but in his theoretical eagerness to apply Ockham’s Razor to his theory of capitalism (in other words, to reduce the theory to the simplest formula, to its minimum common denominator), Marx forgot that capitalist industry can exist and thrive only within a larger “social body” on which it can feed!
Even the best bourgeois economic theoreticians have perceived this essential characteristic of the capitalist economy by adverting to the “externalities” of its operation – that is to say, the ravages of capitalist industry on the environment and on society whose “economic costs” are not included in the circulation of capital, precisely because they are “external”, they lie outside that process of valorization and realization of capital through what is only apparently, and catastrophically, mistaken for “the self-regulating market mechanism” or “impersonal market forces”. (See above all, A. Pigou, The Economics of Welfare and J. Schumpeter, The Theory of Economic Development.)The very fact that Marx dedicated Volume Two of Capital to the schematic analysis of the simple circulation of capital (what Schumpeter described later as Kreislauf or “circular flow”, that is, a capitalist economy in static equilibrium) shows implicitly that Marx believed in the theoretical possibility of such a static equilibrium or circular flow whereby capitalist industry is a “self-contained” unit not reliant on any “external” factors such as classes other than capitalists and workers, the reserve army of the unemployed, the capitalist state and bureaucracy, other nations, non-renewable resources affecting the political relations between capitalists and workers intra-nationally and inter-nationally.
To revert to the simplest criticism we can make of Marx’s theory of capital, in his haste to reduce capitalism to a scientific formula, Marx forgot that “the forces of production” do not and cannot cover the entirety of “the social relations of production” and still less “social relations” overall, and that “the economic base” cannot be separated categorically from “the ideological superstructure” – because politics is not a concentrate of economics but instead it is economics that is a concentrate of politics – because capitalism is not reducible to “impersonal market forces” but is instead entirely dependent on specific social, political and historical agencies that cannot be reduced to a simple “scientific” or “economic” formula! Of course, anyone who has read Volume One of Capital, or indeed the section on “Pre-Capitalist Economic Formations” of the Grundrisse will know full-well that Marx was aware of how violent the transition from feudalism to capitalism was, what he called “primitive accumulation” (ursprungliche Akkumulation) where he describes how capitalism came into being “steeped in blood from head to toe” by expropriating the existing peasantry, especially in England, in what came to be known as “the enclosure movement”. Yet even from this potent historical perspective, Marx still sees the period of primitive capitalist accumulation whereby the bourgeoisie “formally subsumes” the existing agricultural and artisanal mode of production prevalent in the decaying feudal absolutist regime as the doings of “the bourgeoisie” – as a historical “class”, yes, but still as a collection of individual proprietors!
What Marx failed to see, even when it ought to have been so evident, is that the emerging bourgeoisie acted not as a collection of separate individuals but much rather through the agency of the reformed absolutist State – in England as in France! The insurmountable, almost unpardonable, problem with Marx’s theory of capitalism is that he always saw the bourgeoisie as a collective of individual proprietors and entrepreneurs and the capitalist State consequently as “a committee of management” (in the Communist Manifesto) acting not as an independent agency with its own political instruments extending over the entirety of society, including those elements not yet within the cycle of the circulation of capital, but rather as a simple elementary blunt tool of social repression against the proletariat! So keen was Marx to show that the capitalist mode of production could operate through “impersonal market forces”, that he forgot the very violently coercive “act of birth” of capitalist enterprise – that original sin of “primitive accumulation” – that not only lay the foundations for all future capitalist industry but remained to the present day an essential feature of the society of capital!