17

nationalization of the process of production in Linternationalisationdu capital.

16. See C. Palloix, Problemes de la croissance en economie ouverte,Maspero, Paris, 2nd edition, 1973.

17. With its variant, the Heckscher-Ohlin-Samuelson theorem.18. See Christian Palloix, Leconomie mondiale capitaliste,

Maspero, Paris, 2 Vol., 1971 19 B. Drugman has clearly enunciated this role of the State in his

recent work, Etat, lutte de classes et reproduction elargie ducapitalisme, Centre de Recherche Economique et Sociale, Universityof Grenoble, December 1973.

20. See Marx, Capital, Volume 1, p. 215. All quotes from Capitalare from the Progress Publishers edition of 1965.

21. See P. Bye and A. Mounier, Linternationalisation du capitaldes industries agricoles et alimentaires, Grenoble, IREP, December1972.

22. See Suzanne de Brunhoff, La Politique Monetaire, (MonetaryPolicy), Paris, Presses Universitaires de France, pp. 181-183: "Moneyin capitalism is today incorporated into a credit system detached fromits money-commodity base: gold as the fixed standard of price. Fromthis results new monetary conditions for the financing of accumula-tion. But there is no way that the capitalist system can completelyavoid the problem of the reproduction of the general equivalent. Mon-ey which is integrated in the financial flux, even if it is initially a purecommercial credit money (seemingly dematerialized), must, in orderto be validated, find an anchorage point. We saw this when we showedthe role of the central bank as the place where equivalences are ex-pressed. The problem of a truly international currency has not been re-solved."

23. Even though this conflict can reflect the requirements of auton-omy (of the standards of production from the monetary and financialstandards) every standard of production is in the last instance subjectto the monetary and financial standard (which is what happens to theMinistry of Industry).

24. Any number of economists, of political scientists, of sociologists"discover" the multinational firm which puts everything into question where they see a "rupture," there is only a "maturing" of thecapitalist mode of production. What they have not "seen" is that thecapitalist mode of production has been international from its verybeginnings.

25. See the writings of Arghiri Emmanuel and the subsequentcontroversy which developed around his work.

26. See the Methodological Appendix at the end of this paper.27. See the theoretical advances made in the analysis of this point in

the Methodological Appendix.28. See Karl Marx, Capital, Volume 1, p. 215.29. This is often called the "tertiarization" of the economy.30. The level at Fos-sur-Mer.31. It is increasingly irritating to watch the discovery of a set of

Marxist concepts in positivist discussions, in discussions of politicaleconomy. Everyone today uses and abuses the terms "mode ofproduction," "social formation," "internationalization of capital,""relations of production," "productive capital," "commoditycapital," "forces of production." Add class struggle and the dictator-ship of the proletariat and your terminology will be quickly dropped.

32. Whoever speaks of the struggle conducted by "capital" impliesthe existence of its counterpart, the proletariat.

Methodological AppendixCONCEPTUALIZING THE INTERNATIONALIZATIONOF CAPITAL

from Christian Palloix, Linternationalisation ducapital, Paris, Maspero, 1975.

translated by Margaret Bald and David Levey*

One can take two approaches to the analysis of theinternationalization of capital: a functional one or astructural one.** Only the latter approach offers atheoretical framework which includes the essence ofthe contradictory process of internationalization. Thefunctional approach sees the internationalization of

*Corrections on this translation have been made by PatrickClawson, Robert Cohen and Sean Gervasi

**In the French edition, Palloix distinguished between a functionaland an &dquo;organic&dquo; aproach. The latter approach has been called astructural one for this translation. However, it should be clear that bya structural approach, we mean one that considers the process ofmternationalization to be inherent in the very movement of capitalitself.

capital as nothing more than the movement of capitalbeyond a nations borders. This is central to classicalSmithian and Ricardian thought on foreign trade,2 andis reflected in neo-neoclassical thought. The structuralapproach considers the process of internationalizationto be included in the very movement of capital itself, asinternal and essential, at the very heart of the contra-dictory process of the expansion of capital.

At the present stage of our research, ourconceptual apparatus defines the process of inter-nationalization from both the functional and structuralviewpoints by means of the following concepts:concepts:

-the self-expansion of capital-capital as a social relation

18

-the fractions of capital-the division of the system of production into

industrial and financial branches-the division of the system of production into

departments

I. INTERNATIONALIZATION AND THE SELF EXPANSIONOF CAPITAL3

The theoretical analysis of the internationalizationprocess based on the self-expansion of capital leads to aview of the process which is more functional thanstructural, even if the structural view is alluded to inthis approach.

A. The Self Expansion of Individual and Social Capital

Whether examined from the perspective ofindividual capital or of social capital, the self-expansionof capital poses the problem of the transformation offunctional forms which capital assumes and throws offin succession. These forms are the productive form (P),the commodity form (C), and the money form (M).

The two forms assumed by capital-value at thevarious stages of its circulation are those ofmoney-capital and commodity-capital. The formpertaining to the stage of production is that ofproductive capital. The capital which assumesthese forms in the course of its total circuit andthen discards them and in each of them performsthe function corresponding to the particularform, is industrial capital, industrial here in thesense that it comprises every branch of industryrun on a capitalist basis.

Money-capital, commodity capital, andproductive-capital do not therefore designateindependent kinds of capital whose functionsform the content of likewise independentbranches of industry separated from one another.They denote here only special functional forms ofindustrial capital, which assumes all three ofthem one after the other.4 4

The transformation process must not be viewed ina purely formal way; e.g., as a purely formal transfor-mation within the process of circulation. This is be-cause the transformation process, on the one hand, aris-es from the process of production and, on the otherhand, implies a revolution in value:

The transformation ... does not merely con-cern the functional form of capital but also themagnitude of its value; in the second place,

however, the transformation is not the result of amerely formal change of position pertaining to thecirculation process, but of a real transforma-tion experienced by the use-form and value of thecommodity constituents of the productive capitalin the process of production.5 5

The transformation process is in this way closely linkedto the transformation of values into prices ofproduction.6 6

Two preconditions for the process of transforma-tion are: (1) the existence of free laborers, and (2) theexistence of commodities:

The existence of the latter I free wage-laborers ]on a social scale is a sine qua non for M-C, theconversion of money into commodities, to be ableto represent the transformation of money-capitalinto productive-capital.7 7

One of the most obvious peculiarities of themovement in circuits of industrial capital, andtherefore of capitalist production, is the fact thaton the one hand the component elements ofproductive capital are derived from thecommodity market and must be continuallyrenewed out of it, bought as commodities; andthat on the other hand, the product of the labor-process emerges from it as a commodity and mustbe continually sold anew as a commodity.8

1. The Self Expansion of Individual Capital

The unfolding of the cyclical conversion processin which individual capital assumes and discardsvarious functional forms - the process of transforma-tion called the circuit of self expansion of individualcapital - is presented by Karl Marx9 in the expandedformula of the circuit of capital. In this formula, a dis-tinction is made between the purchase of labor-power(L) and purchase of the means of production (Mp) inthe transformation of the money form (M) into theproductive form (P). The productive form passesthrough the commodity form (C) which then takes thecharacter of L and of Mp. On the other hand, thetransformation of the productive form (P) into themoney form (M) always occurs by means of the com-modity (C), giving rise to surplus-value (c-m-c)created in the development of the productive form andmaterialized during its conversions into successiveconcrete forms: commodity (C> C, with C = C + c),money (M> M, with M = M + m), commodity (C =C + c).

The expanded formula for the self-expansion

19

process of individual capital (the transformationprocess) is:

where the advanced value, M, is recovered in the formM at the end of the self-expansion process.

2. The Self-Expansion of Social Capital

As Karl Marx writes, &dquo; ... the circuits of theindividual capitals intertwine, presuppose and necessi-tate one another, and form, precisely in this interlacing,the movement of the total social capital.&dquo;10 The conceptof social capital (as a social relation and not as a&dquo;material thing&dquo;) is born of the interlacing ofindividual capitals. This interlacing gives way to acourse of self-expansion of industrial capital in thebroadest sense; i.e., before its differentiation intoindustrial capital, banking capital, commercial capital,etc. The self-expansion of capital unfolds as the unityof the three specific circuits of capital:

The actual circuit of industrial capital in itscontinuity is therefore not alone the unity of theprocesses of circulation and production but alsothe unity of all its three circuits (money-capital,productive-capital, and commodity-capital).&dquo; I

Independently of the fact that capital is a socialrelation and not a &dquo;thing&dquo; as the neo-neoclassicaleconomists claim, what we mean by the self-expansionof social capital is a phenomenon which is not simplythe sum of the self-expansion of individual capitals. 12In the first place, the self-expansion of social capitaldiffers from the self-expansion of individual capital inthe sense that it is the unity of three circuits of self-expansion:3

-the circuit of money-capital M.. M (I)-the circuit of productive-capital P .. P (II)-the circuit of commodity capital C.. C (III)

In the formula developed below of the circuit of socialcapital, even the circuit of money capital (M .. M)

cannot be identified with the circuit of individualcapitals:

The concept of social capital does not refer here toa pure summation of the self-expansion of individualcapitals. Rather, it refers to the self-expansion of in-dustrial capital in the most general and most abstractsense, before its differentiation into specific industrialcapitals. In this process, which occurs in order to assurethe transformation operation, industrial capitalassumes the forms of fractions of capital calledindustrial capital (in a narrow sense), banking capital,and commercial capital.

In this regard, it is important to carefully definethe self-expansion of social capital, since the movementof self-expansion bears on the very understanding ofthe concept of capital. This self-expansion of capital asa social relation 14 is carried out through the purchase oflabor power (M-L), or variable capital, and through thepurchase of the means of production (M-Mp), orconstant capital. On the other hand, there is thereproduction of social capital through the schemas ofsimple and enlarged reproduction of social capital.1-5

While referring to the structure of social capital asa social relation - a structure which includes constantcapital and variable capital as an expression of thissocial relation in the process of accumulation of capital- the self-expansion of social capital is distinguishedfrom the self-expansion of individual capital because itrelies on an additional form of capital. Even though theself-expansion of individual capital M-C-Mpresupposes the commodity, the self-expansion ofsocial capital hinges on the category of the commodity.the central category of the transformation process.Without the &dquo;commodity,&dquo; there is no transformationof money-capital into productive-capital and,conversely, no self-expansion of capital (whether it beindividual or social). Thus, the commodity category isanchored in the division of the production system into&dquo;industrial and financial branches&dquo; which gives rise tothe self-expansion of capital. The concept of socialcapital in the process of self-expansion is not onlybased on a social structure, but it also recreates astructure of the productive system within the course of

20

self-expansion, since the latter reflects the existence ofthe commodity which depends upon the very divisionof the production system.

Thus, since the self-expansion of individualcapital is carried out on the basis of the maximization ofthe rate of profit, the self-expansion of social capital iscentral in giving rise to the equalization of rates ofprofit. This comes about through the way in whichsocial capital enters into production, confronted with aproductive system which is divided into industrial andfinancial branches. The question of self-expansiongives a specific content to the concept of social capital.This is a dual conception which refers on the one handto the social relation which is capital, and on the otherhand, to the dividing up of this relation in self-expansion - the division of the productive system intoindustrial and financial branches and intodepartments.6

B. The Self-Expansion of Social Capitalon a World Scale

The process of &dquo;internationalization&dquo; in relation tothe self-expansion of social capital does not refersimply to the extension of the process of the self-expansion of capital beyond national boundaries. It isnot a simple reflection of the extension of either thecircuit of commodity capital (C-M-C .. P .. C) (thefirst to assert itself at the world level), or the circuit ofmoney capital (M-C .. P .. C-M), or the circuit ofproductive capital (P.. C-M-C .. P) beyond theboundaries of the advanced capitalist social formations.Saying that self-expansion occurs on a world scale isnot sufficient to define the process of internationaliza-tion. Such a definition would then be purely descriptiveand not theoretical.

The &dquo;internationalization&dquo; of the self-expansionof social capital is defined by the fact that the process ofconverting the functional &dquo;money&dquo; form into the com-modity form and into the productive form (and viceversa) can no longer be fully realized inside of a singlecapitalist social formation. In effect, the central ele-ment in this process of transformation, the commodity,is no longer produced in one nation. It is no longerlimited in this way. The commodity, or rather thecommodity-group, can only be conceptualized, pro-duced, and realized at the level of the world market.This tendency is becoming more and more pro-nounced. 17

This new characteristic means that commoditiesexist - are conceived, produced and realized - moreand more only at the level of the world market and notwithin the advanced capitalist social formations. Itimprints the process of &dquo;internationalization&dquo; on theentire process of transformation and on the process of

self-expansion. It shapes both the internationalizationof the circuit of commodity-capital, the inter-nationalization of the circuit of money-capital, andthe internationalization of the circuit of productivecapital. Thus, there is a double world structure ofcapital, where capital is a social relation and is alsodivided up into branches and sectors in its process ofself-expansion. From this essential character of theinternationalization of the self-expansion of socialcapital flows its self-expansion on a world scale, as anextension of the circuit of social capital beyond thebounds of the advanced capitalist social formation; thismovement gives rise to a functional and descriptiveunderstanding of itself.

II. INTERNATIONALIZATION AND CAPITAL AS ASOCIAL RELATION

The process of understanding capital from theperspective of self-expansion calls attention to thespecific way in which capital is divided up into in-dustrial and financial branches and into departments.Thus, the process of internationalization refers to sucha structural conceptualization of capital. The conceptof internationalization as well as the concept of capitaldepend here on an approach based on the process ofself-expansion. The question of accumulation and ofthe mode of accumulation of capital enable us to seecapital as a social relation, a class relation, underlyingand included in the movement of self-expansion whichassures reproduction.

&dquo;We have seen that capitalist production doesnot only create commodities and surplus value,but also reproduces to an ever increasing extentthe class of wage-laborers ... &dquo;18

The relations which arise from the heart of themovement of the self-expansion of social capital stampcapital with the seal of social relations; they are theconcrete manifestation of capitalist relations ofproduction, the relation of exploitation (necessary labor- surplus labor) in the process of production itself. Thecapital-relation which is produced in the self-expansionof capital exists neither within production alone9 norwithin circulation alone; it exists and is reproducedwithin the unity of production and of circulation, asMarx points out very clearly:

&dquo;The capital-relation during the process ofproduction arises only because it is inherent in theact of circulation, in the different fundamentaleconomic conditions in which buyer and sellerconfront each other, in their class relation. 20

21

It is quite evident, however, that the forms whichthe fundamental capitalist relation assumes differdepending on the place where they are analyzed. Theprocess of production itself is characterized byrelations of exploitation and of cooperation within thelabor process; both production and circulation arecharacterized by social relations (class relations)imprinted in determining the value of capital. There aretwo sides of this social relation, of capital, which can beanalyzed within the process of internationalization as asocial relation by grasping both of its aspects: thefunctional one and the structural one.

A. The Functional Approach to theInternationalization of Capital

We can use the following method to identify thepoints within the general circuit of social capital wherecapital as a social relation will be internationalized byplacing them in brackets:

Bracket 1 designates where capital is inter-nationalized in its functional aspect, as a social relationin its process of self-expansion. Bracket 2 indicateswhere self-expanded capital has incorporated themovement of internationalization. The process ofinternationalization of capital incorporated into thevarious forms which capital assumes as a social relation&dquo;transcends&dquo; the process of production but is also anexpression of it.

1. The Internationalization of Capital inits Process of Self-Expansion:M-L/M-MpWe have here one of the most characteristic forms

which the capitalist relation assumes in the self-expansion of capital: the purchase of labor power as acommodity confronts the purchase of the means ofproduction, thus radically setting apart the labor forcefrom other factors.

22

approach is inherent in this analysis because inter-nationalization is defined as foreign self-expansion,across borders, during the intersecting operation.

If M~ 1 designates the self-expansion of thehegemonic strata of capital (U.S. capital, for example),M2, the dependent self-expansion of European capital,and capital M (capital which self-expands in Africa,for example, or in Latin America) is dependent on M 2and passes in its self-expansion through C2. M2, itmust be noted, serves a relay capital between M, andM 3 . From the perspective of the functional approach,different chains of dependence become apparent, theprocess of internationalization pushing its various an-tennae into different areas - Brazil, Ivory Coast, etc. -on behalf of the hegemonic strata of capital. Theprincipal fault of such an analysis is that, byoveremphasizing the center-periphery division, it leadsinto a theory of super-imperialism.

2. The Internationalization of Self-ExpandedCapital: c-m-c/C-M-CWithin the whole of this act, which is broken

down into C-M and M-C, we again find thedevelopment which we have already noted: followingon the process of the self-expansion of capital, a capitalimmediately appears which initiates its process of self-expansion. We will not concentrate on this aspect; i.e.,internationalization as an expression of the inter-secting of the self-expansion of capitals which loosentheir internal constraints. Here, we are only concernedwith the concretization of capitalist relations within thetotal act of circulation 22 under its forms of surplusvalue and profit (the opposition of c-m-c againstC-M-C).

The commodity C appears as the functional formof the separation of surplus value from capital-value (cseparated from C); in the same way, M is the act ofseparation of profit from capital-value (m separatedfrom M):

It is only in the circuit described by C itself thatC equal to P and equal to the capital-value can andmust separate from that part of C in whichsurplus-value exists, from the surplus product inwhich the surplus-value is lodged. It does notmatter whether the two things can be actuallyseparated, as in the case of yarn, or whether theycannot, as in the case of a machine. They alwaysbecome separable as soon as C is transformedinto M. 23

The entire act of circulation makes it clear that theseparation of c and C, of m and M, depends on aprocess which is set in motion on a world-wide level.

The internationalization of capital as a social relationthrough the opposition of the relations c/C and m/Mis seen both in fact and in theory (in so far as the func-tional approach is concerned). Internationalization ofthe income from capital, or profit, is clearly evident inthe earnings of U.S. capital in Latin America, Europe,Asia and elsewhere. The same is true for the profits ofJapanese capital and European capital engaged in inter-national operations.

In theory, the internationalization of capital as asocial relation is seen in a very narrow manner in Em-manuels thesis of &dquo;unequal exchange&dquo;.24 On one hand,Emmanuels theory reveals all the faults which resultfrom a narrow theoretical approach to the total circuitof social capital. This approach deals with just theinternationalization of circulation (the act c-m-c),and forgets that the distribution relationship is only thereverse of the relation of production M-L/M-Mp,giving rise to all the erroneous conclusions drawn fromsuch a narrow approach. On the other hand, Em-manuel falls completely into the trap of the functionalapproach in which internationalization is seen in therecovery or loss of surplus value at the border, at themoment of the transfer of a block of embodied value(low wages) toward another block of embodied value(high wages), blocks which result again in the tradi-tional center-periphery conceptualization.

B. The Structural Approach to the Internationaliza-tion of Capital

The process of internationalization, as an organicelement inscribed within the contradictory movementof capital, masks the two forms which the capitalistrelation assumes within the self-expansion of capital.Only the structural approach to internationalizationreveals the real capitalist content of internationaliza-tion : the law of uneven development.

I. The Internationalization of Capital andthe Process of Production: the Lawof Uneven Development t

Viewing the internationalization of capital fromM-L/M-Mp draws our attention to the expansion ofthe extraction of both absolute and relative surplusvalue. The internationalization process is not evident incapitalist relations, but is inscribed within the verymovement of capital, as a process which cannot be sep-arated from it.

In fact, the relation M-L/M-Mp is not a formalrelation which unfolds only within circulation; it is arelation which conceals the transformation ofadvanced capital-value into productive capital, withinthe process of production. The movement of capital, in

23

the purchase of labor power and the purchase of themeans of production, implies the fusion of these twoelements which confront each other within the produc-tion process. Thus the movement of capital concealsinternationalization as an internal process, because thisrelation (M-L~M-Mp) is a total entity, which impliesat the same time the unity and the differentiation ofcapital in relation to the aim of the production process:the extraction of surplus value. The movement ofcapital includes at one and the same time both thenecessity for movement towards an equalization ofconditions of production and of exchange and towardsthe differentiation of production and of exchange inorder to respond to the perpetually insoluble problemof the extraction of surplus value (absolute and rela-tive). The movement of capital creates the dynamic andhistoric differentiation within the capitalist mode ofproduction which is explained in part by Lenins law ofuneven development.

The internationalization process is not a realityexternal to capital, a reflection, a result (a spatial over-flowing, an intersecting of foreign capitals). The inter-nationalization process, within its constituted domain,is a result of the world-wide universality of the capital-ist mode of production (this is what differentiates theprocess of internationalization from imperialism).Internationalization manifests itself both as an expres-sion of: the national division (into social formations);the universality of the capitalist mode of production(the generalization of wage-labor); and the law ofuneven development. It takes this form in order toassure the continual increase of the rate of surplusvalue on the basis of the fusion of M-L and M-Mpwithin the process of production.

The internationalization of capital and the work-ings of the internal national economy are not antagon-istic, not two alternative realities, but are twophenomena which constantly mirror each other,amplifying each other in their own historic develop-ment because they are both shaped and moulded bycapital. Internationalization has its roots in the law ofuneven development; it assures the reproduction ofworld-wide inequalities, not as a final goal of capital,but as a condition for increasing the rate of surplusvalue through M-L, through M-Mp, and throughtheir fusion within the process of production.

In a structural approach, the act M-L, within theprocess of the internationalization of capital is notsimply the international purchase of labor power (afunctional form), but the international differentiationof the working class (whose cooperation is broken upinternationally, in a paradoxical manner). This differ-entiation occurs through the deskilling of workers,reconversion, the differentiation of labor processes,and the differentiation of the production-reproduction

of labor power and the value of labor power. From thisorganic differentiation of capitalist relations flows thefunctional aspect which capital assumes within theexternal extension of the internationalization process,through both the international purchase of labor powerby the hegemonic strata (the search for low wages) andthe intersecting of diverse capitals within the operationof self-expansion.

As opposed to the functional approach, whichwould logically tend to conclude that the unification ofthe working class may be attained through increasedcooperation, the structural approach to the inter-nationalization of capital at the level of the act M-Lbrings to light the intrinsic tendency of capital. Thus,in its international aspect, capital prevents any unity ofthe international working class by dividing up differ-ent working classes, taking advantage of areas of un-even development and amplifying existing schisms.The internationalization of capital is antagonistic tothe international class struggle of the proletariat whichattempts to reestablish the unity of the working class.

2. The Internationalization of Capitaland Distribution

Insofar as distribution relationships in the processof self-expansion of capital are only the other side ofthe relations of production, it is possible to conceive of

, the international distribution of surplus value, from thefunctional perspective of internationalization, as onlythe expression of its organic process: an internationaldifferentiation of the national and internal processes ofself-expansion so that the international transfer ofsurplus value is assured.

Nevertheless these relations of internationaldistribution require that the act of circulation, Ct, beable to negate national and internal laws of value(national and internal prices of production) and substi-tute transfer prices for them. We must remember thatcapital is attempting to base itself on internationalvalue. Insofar as the self-expansion of dominant U.S. orJapanese capital &dquo;passes through&dquo; the self-expansion ofdistinct capitals which it subjugates through the pres-ence of subsidiaries - and this is precisely the role ofsubsidiaries - the dominant capitals &dquo;snatch up&dquo; theproducts of other capitals or products of other modesof production in order to transform them into &dquo;com-modities&dquo; within the C-M-C circuit of hegemoniccapital. The product of the productive process of de-pendent capitals only becomes a &dquo;commodity&dquo; withinthe &dquo;commodity group&dquo; controlled by the hegemoniclayer of capital. A basic product, like the steel of the de-pendent capitals is &dquo;snatched up&dquo; by hegemonic cap-ital, to be transformed into a commodity within theeconomic chains hegemonic capital controls, passing

24

along the line of the commodity groups for housing,energy, transports, packing, etc.

Hegemonic capital, through the control which itexercizes on C-M-C, includes in its sphere ofcirculation the products of other capitals in the samemanner as earlier, when the international circulation ofcommodities &dquo;snatched up&dquo; the products of modes ofproduction other than the capitalist mode of produc-tion in order to turn them into commodities through theprocess of circulation.

3. The Internationalization of Capital, Inter-national Value, and World Prices

The law of value, whatever may be the expressionthat one gives to it (the social sanction of particularconcrete works, the distribution of social labor timeamong different productive activities, the validation ofsocially necessary labor time, etc.) is reflected first inthe division of social labor into necessary labor andsurplus labor and in the struggle over these two frac-tions of social labor, of which one (surplus labor,surplus product, surplus value) is appropriated by aclass (the capitalist class).

The process of internationalization, as a processorganically tied to capital, indicates that the develop-ment of the struggle between necessary labor andsurplus labor is circumscribed: on one hand, within theframework of the world-wide universality of the capi-talist mode of production (the tendency to equalizationof conditions of production and of exchange) to theextent that capital can only reproduce itself on the basisof its unity; on the other hand, within the frameworkof division of the never-maintained unity of capital andthe capitalist mode of production (the law of unevendevelopment as a tendency to differentiation of condi-tions of production and of exchange). This results ininstability in the international value system, so that thedevelopment of the internationalization process isregulated in a chaotic manner. As a result, internationalvalue must be extended to try to equalize the conditionsof production and of exchange - as a system ofproduction and exchange norms - in such a way thatthe internationalization of capital is maintained and af-firmed, and optimal conditions for the extraction ofsurplus value are generalized. In other respects, how-ever, it is necessary for capital to extend the differen-tiation of conditions of production and exchange on aninternational level in order to increase the rate ofsurplus value. In this way, having taken into accountthe international primacy of the process of differentia-tion, the role of the law of international value isconstantly negated by its own conditions of existence,while being constantly reborn within the course of itsown negation.

The concretization of this frantic instability ofinternational value, within the course of its chaoticexistence, is the always aborted, but continuous, searchfor a stable international standard of value for theinternational monetary system - an old Ricardiandream. This is a necessary, but impossible search. Thenorms which define international value through thetendency to equalize the conditions of production andof exchange operate through a generalization of theoptimum rates of surplus value within diverseindustrial and financial branches. Once these norms areput in place they must immediately cede their place tonew norms, based on the differentiation of conditionsof production and of exchange that are needed to in-crease the rate of surplus value. Anarchic and chaoticinstability marks the rule of international value andgives it a special character. This has led some authors torefuse to conceive of international value as somethingimposed upon national values.

If international value &dquo;regulates&dquo; the internationalsystem chaotically and in an anarchic manner, never-theless, because of its inherent nature, it fully repro-duces its own essence - namely, inequality in develop-ment. International value is not imposed any less onvarious internal national economies, which are forcedto align themselves to international norms of produc-tion and exchange which are revealed to their full ex-tent in the national economies.

Any direct international management of the law ofinternational value is unattainable within the capitalistmode of production (there can be no such thing assuper-imperialism or ultra-imperialism; we should haveno illusions about the managerial capacities of supra-national organizations such as the InternationalMonetary Fund). The management-sanction of the lawof international value occurs in a differentiated anddivided manner through the practices of differentnation-states.

Another consequence of this instability of inter-national value is the difficulty of standardizing inter-national rates of profit. This gives free rein to the inter-national differentiation of rates of profit among themore or less hegemonic strata of capital and to theirengagement-disengagement in the different industrialand financial branches. International prices of produc-tion do not appear in the establishment of prices ofproduction: there is no direct international conversionof systems of international values into world produc-tion prices. The transformation of international valuespasses through internal, national frameworks of man-agement-sanction, with a shifting of internal nationalvalues towards international values. There is atransformation of those international values into pricesof production according to the law of management-

25

international value. The world price is not a true priceof production; it is a transfer price for the developingdifferentiation of systems of production. Thus, worldprices drive inflation because they reflect the instabilityof the law of international value and the anarchic andchaotic character of the internationalization of capital.The instability of world prices and their inflationarycharacter are a result of the internationalization ofcapital.

III. INTERNATIONALIZATION AND FRACTIONSOF CAPITAL

Within the course of the self-expansion of socialcapital, identified by Marx with industrial capital in thebroad sense, it is necessary that fractions of capital befixed both within the process of production and withinthe process of circulation. This permits the adoption ofnew techniques and assures the conversion of the func-tional norms of capital and of money-capital intoproductive capital (by commodity-capital) and ofproductive capital into money capital (by commodity-capital) :

But it (industrial capital) can be such a unityonly if all the different parts of capital can gothrough the successive stages of the circuit, canpass from one phase, from one functional form toanother, so that the industrial capital, being thewhole of all these parts, exists simultaneously inits various phases and functions and thus des-cribes all three circuits at the same time. Thesuccession (das Nacheinander) of these parts ishere governed by their co-existence (dasNebeneinander), that is to say, by the division ofcapital. 25

Both the technical and the social division of capitalare concretized by the fractions of capital which assurethe chain of transformations: commercial capital,banking capital, industrial capital (in the narrowsense), and financial capital.26 The regrouping of cer-tain individual elements of these fractions of capitalinto hegemonic strata, commanding and giving im-pulse to the extraction of surplus value, makes it looklike certain elements occupy a particular position andcontrol the productive and financial system - &dquo;bigcapital&dquo; or &dquo;monopoly capital.&dquo;

A functional view of the internationalization offractions of capital focuses on the &dquo;joint ventures&dquo;which link the diverse parts of internal national capitalsat an international level and which would be inter-nationalized (a tautology) within such a process; e.g.,joint ventures between large commercial and depositbanks, joint ventures of large multinational industrialfirms, etc. A structural understanding of the inter-

nationalization of fractions of capital emphasizes therole these fractions play in the international conversionof the functional forms of capital, thus reflecting theinternationalization of these fractions in relation to the&dquo;commodity.&dquo; The control of the economic chain forcommodities occurs at the international level.

In fact, the internationalization of fractions ofcapital depends more on the hegemonic strata whichcommand and shape the international differentiationof conditions of production and of exchange. Inter-nationalization, from a structural point of view, refersless to the fractions of capital - industrial capital, com-mercial capital, and banking capital - and more to thehegemonic strata of capital that control the productionof absolute and relative surplus value in the industrialand financial system.

IV. THE INTERNATIONALIZATION PROCESS ANDTHE DIVISION OF CAPITAL INTO INDUSTRIAL

AND FINANCIAL BRANCHES

The concept of the branch or &dquo;industry&dquo; (R.Borrelly) follows from a conception of capital whichreflects the dominance of the tendency to equalizationof conditions of production and exchange over theirtendency to differentiation, and the dominance of thetendency to equalization of rates of profit whichfollows from the maximization of rates of profit:

Capitalism cannot constitute a durable systemwithout a law of internal coherence. But a lawwhich governs the functioning of capitalism mustnecessarily be compatible with its essentialcharacteristics, and must take account of, ratherthan deny, the most obvious facts. Inequality canbe ascertained superficially without finding outhow things work. Equality reflects an ultra-simplifying principle, which depends upon thelimiting case, but doesnt attempt to elaborate anall-encompassing theory. The acceptance of thetendency to equalization, on the contrary, takesinto consideration this intuition in its dynamicreality; that is to say, the search for a rule whichcan explain the inequalities which are only themanifestation of a constantly active but alsocontradictory tendency. 27

The conceptual approach to the industrial system,using the branch or industry, is hotly contested bythose who adhere to an approach by departments,28who emphasize only the tendency to differentiation ofconditions of production and of exchange; that is, thetendency to differentiation of the rates of profit. Onthe other hand, the division of the system of produc-tion into industrial branches must not obscure thereality of the division into departments.

26

A. The Branch Concept, as a Means ofUnderstanding the Division ofCapital and the System of Production29

a) The concept of a branch implies a dynamic sys-tem of relations among the commodity-product, theproductive process, and the process of circulation. Theconcept of a commodity, which comes from the processof production, is central to an understanding of thebranch. A commodity is defined by two characteris-tics :

-its reproducibility (the basic element in this caseis a commodity within a process of industrial reproduc-tion) ;

-the fact that it is the manifestation of the law ofvalue, as a system of transformation of values intoprices of production (capital invested in the &dquo;com-modity&dquo; is subject to the law of the tendency ofequalization of rates of profit; however, the simple&dquo;product,&dquo; which may be produced within a branch, isthus situated at a certain &dquo;distance&dquo; from the law ofvalue).

b) The branch appeared as a &dquo;combination,&dquo; and&dquo;agglomeration&dquo; of historically specific industrieswhich have developed one after the other; thus, thebranch is a combination of technical processes pro-ducing use values (products), within a dominanteconomic chain which produces exchange values andwhich is characterized by certain &dquo;commodities.&dquo;

The economic chain, (which includes the self-expansion of capital according to the law of value asregulator) dominates the technical processes always influx, which are specific to industries and assures theflexibility of the industrial and financial branches inrecoordinating, recomposing, and differentiating theexisting technical procedures, while implanting newones. The economic chain transmits production and ex-change norms to the production process and thecirculation process. This most clearly reveals the actionof the law of value. In this way, the economic chain isclosely linked to the engineering industry whichconceptualizes and manages the production and ex-change norms.

Technical processes shape the organization ofmachines used to produce products as use values. Aproduct, as a use value, can be produced by differenttechnical processes; i.e., there are different ways to or-ganize similar machines or machines which are quftedifferent.

From among the alternative choices, the economicchain tends to impose a dominant technical process fora limited time. From this comes the rule: a branch ischaracterized by the tendency toward a dominantproduction process. This is the counterpart of the ten-dency to a particular organization of the system of

machines, and the tendency to the standardization of aparticular labor process.

c) We must distinguish economic branches (wherethe economic chain is integrated downstream towardother branches), from the other branches which are partof the industrial system.B. The Process of Internationalization ofIndustrial and Financial Branches

The process of internationalization encompasseseach element which enters into the definition of thebranch: the commodity, the production process, andthe process of circulation. More importantly, however,it reacts back upon the dynamic aspect of the branch,the economic chain which shapes it. As part of theinternationalization process, different industrial andfinancial branches switch from a &dquo;commodity&dquo; strategywithin their internal, national context to a strategy of&dquo;commodity-groups&dquo; or &dquo;commodity sub-groups&dquo; atthe level of the world market. This establishes a domin-ant production process at the international level and aprocess of specific international circulation of theproducts which are part of the production and realiza-tion of the commodity-group.

The economic chain, which unites different indus-trial branches, tends for this reason to operate only onthe world level. It shapes the establishment of internal,national technical processes on a world-wide basis,thus furnishing the products which enter into thecommodity-group. Such technical processes can becompletely changed to be adapted to national econo-mies. Economic chains are regulated by hegemonicgroups of capital.

The international economic chain provides thatconditions of production and exchange tend to equalizethrough the imposition of production and exchangenorms and through the generalization (and the transfer)of technical processes. This generalization of technicalprocesses, which occurs while they are maturing andprovides for the implementation of more moderntechnical procedures, is given the strange name&dquo;transfer of technology.&dquo; The transfer of technology toless developed areas often involves technical processeswhich are among the most sophisticated. It neverreflects a shift of the economic chain occuring duringthe internationalization of capital.

But the international economic chains produceconditions for differentiation even while they aredominated by the tendency to equalization. Technicalprocesses which have matured continue to be utilized insome areas at the very time that they are being replacedby new processes elsewhere. The internationaleconomic chain is continually in flux, calling on otherchains which are needed to provide for the increasingrate of surplus value required by hegemonic capital.

27

V. Internationalization and the Divisioninto Departments

As a counterpart to the industrial branch structureof capital and of the production system which allowsthe dominance of the tendency to equalization, thedivision into departments allows for a structure ofcapital and of the production system that responds tothe differentiation of conditions of production and ofexchange and the apparent differentiation of the ratesof profit.

Among those who take a one-sided view of thedivision of capital and the production system intodepartments (and not into branches) to explain capitalsself-sustained disequilibrium are Gillard, Deleplace,other members of the SIFI group and certainly manyothers.

Let us quote from Gillard:3o

On the most abstract level... one must explainwhy the modes of restoring equilibrium are trans-formed (why there is no solution of continuity inproportion to development), and how the mostcharacteristic effect of restoring equillibrium is toengender new disequilibria (by extension to otherdomains than that affected by the initial disequil-ibrium) ... 31

... In this sense, heterogeneity is not a statis-tical phenomenon which one must first representin numbers, but a system of interpretation of thecauses of irregularity ... 32

It is doubtful that this system of interpretation isan analysis of departments, since it is a theoreticalconstruct which is very distant from a proper commandof the interpretation of the facts and of the evolution ofthe capitalist system. Deleplace favors, moreover, adepartmental construct in which a so-called &dquo;doubledestination&dquo; goods sector polarizes the rate of profit toits own benefit and to the detriment of others. Thisthesis holds that the heterogeneity of the reproduction

of capital comes about through the continual differen-tiation of rates of profit:

A glance at the historic evolution of the capital-ist economies has led us to distinguish threeepochs, which differ in the characteristics of thecircuits of capitals and the constraints onreproduction. In the course of the first, the invest-ment of capital in commercial activity by itself re-veals the divergence between profit margins.During the second, the separation and thecomplementary nature of the department ofcapital goods from that for consumption goodswas obtained through a uniformity of the rates ofprofit. In the course of the third, the predomin-ance of a department of goods with a doubledestination is established through a polarizationof the rates of profit in its favor, and to the detri-ment of the sector of goods with a specificdestination. &dquo;33

The division of capital and of the productivesystem into departments, if it does account for thedifferentiation of the conditions of production and ofexchange, is not antagonistic to the division intobranches which complements it and specifically identi-fies it. The division into departments shapes both theincrease and differentiation of rates of surplus value(absolute and relative). It is based upon the modes ofaccumulation of capital, differing from the divisioninto industrial branches which revolves around theself-expansion of capital.

The division into departments results in particular&dquo;groupings&dquo; of industrial branches at the nation-statelevel. Every ordering of departments within the nation-state is the product of the internationalization processand of the international differentiation of departmentswhich are appropriate to each social formation. Thedouble division of capital and of the system of produc-tion into industrial branches and into departmentsestablishes and reinforces the law of uneven develop-ment.

NOTES TO APPENDIX

1. See Chapter 1, Section 2 of Linternationalisation du capital2. For Smith, exports are an external solution to the internal "lim-

its" on market expansion, and thus to the limits on the internal self-expansion of capital. For Ricardo, imports are an external solution tointernal declines in the rate of profit. See Christian Palloix, Problmesde la croissance en economie ouverte, Paris, Maspero, 2nd edition,1973; Leconomie mondiale capitaliste, Paris Maspero, 2 volumes,1971.

3. For further development of this point, see C. Palloix, LesFirmes multinationals et le procs dinternationalisation, Paris,

Maspero, 1973, chapter 5, translated in Hugo Radice, InternationalFirms and Modern Imperialism.

4. Marx, Capital, volume 2, p. 505. Ibid, volume 2, p. 97.6. On the movement of "revolutions of value," see Marx, Capital,

volume 2, pp. 108ff.7. Ibid.,volume 2, p. 34.8 Ibid., volume 2, p. 1189. Ibid., volume 2, Part I.10 Ibid., Volume 2, p. 357.

28

11. Ibid., volume 2, p. 106.12. See the critique of our work by J.L. Lespes, Theorie et Pratique,

no. 1, December 1973.13. For an analysis of the technical characteristics of these circuits,

see Christian Palloix, Les firmes multinationales... , Chapter 5.14. See Marx, Capital, Volume I, Part 3.15. Ibid., Volume 2, part 2.16. See Chapter 4 of this book for the distinction between branches

and sectors; also see below.17. It is in this sense that we must interpret Marxs writings on the

subject of internationalization during the circuit of the self-expansionof capital. Note Marxs extraordinarily strong passage on the analysisof contemporary capitalism: "It is therefore the universal character ofthe origin of the commodities, the existence of the market as [a] worldmarket, which distinguishes the process of circulation of industrialcapital. What is true of the commodities of others is also true of themoney of others." (Karl Marx, Capital, Volume 2, p. 113).

18. Marx, Capital, Volume 2, p. 34.19. Compare this with the positions taken by the SIFI group and by

Poulantzas.20. Marx, Capital, Volume 2, p. 32.21. Ibid., Volume 2, p. 33.22. Let us indicate that one should never take the act of circulation,

Ct, as an independent process of circulation, because it is alwaysunited with the process of production which precedes it and follows it:

CM: conversion of productive capital into money capital tothe extent that M discloses the commodity C, an issuance of P.

MC: conversion of money capital into productive capitalthrough the separation of C into L and Mp, whose fusion is carriedout within P.

23. Marx, Capital, Volume 2, p. 91.24. A. Emmanuel, Unequal Exchange, New York, Monthly Review

Press, 1972.25. Marx, Capital, Volume 2, p. 106.26. Palloix, Les firmes multinationales ... , ch. 5, pp. 163-173 for a

mre detailed technical analysis.27. Rolande Borrelly, Les disparites sectorielles des taux de profit.

Thesis, Grenoble, March 1973, p. 310 (to be published by PressesUniversitaires de Grenoble).

28. See the works already cited by the SIFI group, and by L.Gillard, and G. Deleplace and others who take this approach.

29. The reader must continually compare this purposely summaryand schematic presentation with the content of various chapters ofthis book, particularly chapter 4.

30. L. Gillard, Le Secteur comme concept thoretique: essaidapplication lanalyse de la croissance et des fluctuations. Thesis,University of Paris I, June 1971.

31. Ibid., p. 539.32. Ibid., p. 547. One can easily agree with the first part of the

above quote, yet the construction of the sectors reveals an overly"theoretical" preoccupation on the authors part.

33. Ghislain Deleplace, Repartition et accumulation de capital:essai sur al diffrenciation des taux de profit. Thesis, University ofParis I, December 1972.