by Gill Hands
In Volume 1, Marx looks at the form the capitalist economy takes and explains his economic theories in great detail. The first nine chapters deal with the explanation of his economic theory; the rest of the book explores the evidence which shows the ways in which capitalists exploit their workers. Volumes 2 and 3 of Das Kapital were published by Engels, written by him but based on notes that Marx left before he died. Volume 2 of Das Kapital deals mainly with the way money is transformed into capital and the way in which the circulation of capital and profit combine to form an economic system.
Volume 3 deals with capitalist production as a whole and the part that competition has to play in the economy. The first volume is the most interesting one for the non-academic reader. The second and third volumes are rather more dry and of interest mainly for those with a deep and theoretical thirst for knowledge of political economics and historical materialism.
Despite being the most interesting for the lay person, the first volume is not an easy read, especially as many people today are not always aware of the literary references that Marx uses; he was rather fond of using puns and allusions to books that he was reading at the time. Also, it is rather off-putting to open a book to find that it seems to consist of 50 per cent footnotes in tiny writing (for anyone really interested in what Marx had to say, the first volume is worth reading and the footnotes are some of the most interesting sections). Fortunately, for those without the time for a marathon reading session, there are two other works that explain Marx’s economic theory. As these works were based on lectures given to working men’s associations they are expressed in much simpler terms, but they still explain his economic theories in great detail. They are:
Wage-labour and Capital – based on lectures given in 1847 and finally published in 1849
Value, Price and Profit – based on lectures given in 1865 and not discovered until after Marx’s death.
Das Kapital was not written solely as a book on economics, however. It was an amalgam of history, society and economics; Marx was not interested in economics purely as a way of predicting market prices in the way Adam Smith or David Ricardo had been in their explorations of political economy. Marx was interested more in the concept of the economy and its relation to the society around him at that time in history. He wished to describe the capitalist society, to understand what had formed that society, to see how it worked and to try and predict how it would develop or be destroyed by its internal contradictions or dialectics.
Dialectical materialism, historical materialism and economy
Dialectical materialism is a term that is often used in relation to Marx and Marxist thought but it was not a phrase that Marx used himself.
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Insight
It is always important to examine the source of any information and differentiate between what Marx actually said and how it has been interpreted.
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It probably entered Marxist theory through the writings of Georgi Pleknanov, a Russian socialist, and became popularized as a term under the rule of Lenin in the Soviet Union. Dialectical materialism is a synthesis of the philosophical terms of dialectics and materialism. Dialectics is often used in different ways by philosophers but most of them agree that conflict, or contradiction, is a part of the development of any dialectic process.
In the last chapter we saw that Marx was greatly influenced by Hegel and by Hegel’s use of the dialectic: a philosophical belief that the thesis is always contradicted by the antithesis but eventually develops into the Aufhebung or sublation. Hegel’s dialectic view was an attempt to explain the growth and development of human history and thought; his philosophy was an idealist one, believing spirit to be at the centre of the development of history. Marx took a materialist view of the dialectic. He concentrated on the actual, material contradictions of life rather than on abstract philosophical theories and from this he developed the view that history was a product of class struggle.
Marx himself used the phrase the ‘materialist conception of history’ to describe his theory and Engels shortened this to the phrase ‘historical materialism’. Marx saw capitalism not as the end of a process of the development of history as Hegel did, or as a natural result of the desire of people to ‘truck and barter’ in the way that Adam Smith did, but as a transitory phase in the progression of history. It would be a transitory state of society because of the internal contradictions or dialectics that would bring about its downfall.
This materialist view of history and its relation to economics is an important part of Marxist thought, for inherent in the dialectic viewpoint is the idea that the capitalist economy can only develop by swinging from one extreme to the other and that it will eventually collapse as a result of the contradictions present within it. In the dialectic view of the world everything is interconnected, constantly in motion and in a process of change, even society and the economy. This was what Marx was trying to understand and explain in his writing of Das Kapital.
The capitalist economy
In Das Kapital Marx described the capitalist system that he saw had developed in Europe from feudalism. At the time Marx was writing, the Industrial Revolution in Europe was changing the way that people lived and worked into a capitalist one. It is important to remember that when Marx wrote Das Kapital, although capitalist industry and the factory system were very important in a few countries in Europe, mainly Britain and France, most of Europe and the rest of the world were still living in a semi-feudal way. Today capitalist technology, industry and economics are on a worldwide scale, something that Marx predicted in his writing.
Marx’s historical and materialist view of the world economy states that there had been four main stages in the development of the economy and society up to and including capitalism:
Primitive communism – This was the type of society of primitive hunter-gatherers where people had to work in a co-operative way to benefit from the food and raw materials provided by nature. Marx saw this form of society as a classless one.
Slave society – This developed where some people gained power over others, usually as a result of warfare and so there was a lower class of those that worked and were not free and an upper class that exploited them.
Feudalism – In feudalism the land was divided up between nobles in return for support for the ruler of the country. There was a strict class hierarchy from royalty at the top, down through nobles, clergy, merchants, guild artisans and serfs. The serfs had some claim to their own land but most of their labour belonged to the lord and they had to pay taxes or tithes to the nobles and the Church.
Capitalism – This is a form of society that developed after the French Revolution, which comprised two main classes: the bourgeoisie and the proletariat. These classes are explained in more detail in Chapter 6, but basically the bourgeoisie were the rich and middle classes and the proletariat were the workers. It is also an economic system where the means of production are mostly privately owned and capital is invested in goods and services in order to make a profit. It is the dominant economic system in the Western world today, but at the time that Marx was writing it was just beginning to spread as a result of the Industrial Revolution in Europe. The word capitalism began to be used by Marxists and was popularized by them. Like many terms attributed to Marx, it was one he did not use himself. He generally used the phrase ‘the capitalist mode of production’ when talking in economic terms, or ‘bourgeois society’ when describing more social aspects.
Marx’s date for the beginning of the capitalist mode of production was the last third of the eighteenth century, for this was when industrial developments led to the factory system of manufacture. Before this the economy had been a mercantile one, based on the trading of merchants and the accumulation of wealth in the form of gold or precious metals. The agricultural system was changing too. The ‘Enclosure Acts’ in Britain meant that commonly owned land came under private ownership. Instead of serfs living at subsistence level on the land of a feudal lord
, with some rights on common land, they began to grow cash crops for sale on the open market.
Under the feudal system, workers were tied to plots of land without rights. Their surplus products then became the property of an aristocratic landlord class. The capitalist system had a different economic structure because it relied on costly machinery and factories before products could be made. Only those with money to invest could afford to own these.
Capitalism is unique because:
Only under capitalism does human labour power become a commodity to be bought or sold.
Under capitalism all production is the production of commodities.
Commodities
The classical economist Adam Smith defined commodities as products that are produced to be sold on the market. Commodities existed before capitalism, as did money. However, under capitalism the economy is dominated by commodity production in a way that didn’t exist in pre-capitalist society. In feudal or slave societies, a person would usually exchange a commodity to obtain something that they needed, and money, if it was used, was just an intermediate stage of the process. Marx showed this financial circulation as C–M–C, where C stands for the commodity and M is money. The producer would sell his commodity for money and use the money to buy another commodity that he needed.
Under capitalism the circulation is slightly more complicated and can be shown as M–C–M1. In this case the money is invested by the capitalist to produce commodities which are then exchanged for more money. In capitalism the final amount of money is greater than the initial amount that was invested and this is the profit or, as Marx called it, the ‘surplus value’.
Theory of surplus value
Profit and surplus value were terms used in the works of classical economists like Smith and Ricardo but they were terms that were taken for granted and not examined in detail by them. At face value you make a profit if you sell something for more than you paid for it, but what makes one thing worth more than another, who decides it and how? Marx wanted to explore the question that puzzled the economists of the time: where does surplus value come from? To understand this he compared the way he believed the feudal economy worked with the workings of the economy under the capitalist mode of production.
Under the feudal system the landlord allowed his workers to cultivate the land in return for unpaid work, or rent, or both. It was obvious to all concerned that the landlord acquired the surplus product. Under capitalism this fact is hidden. Workers appear to be free to sell their labour power to the person who will give them the highest wages. It appears that they are given a fair day’s wage for a day’s work but, according to Marx, workers are being exploited. This exploitation is hidden by wages which allow the capitalist to cash in on the surplus produced by the workers. It took Marx many years to work out this theory of surplus value. It is a difficult concept, based on what a person’s labour, or work, is actually worth and how it is exchanged for goods. To explain this it is necessary to go into detail about the way the capitalist economy works and it is more easily understood by going back to the basics of the economy as Marx did, starting with the labour theory of value.
THE LABOUR THEORY OF VALUE
All products in capitalism are commodities. According to Marx, commodities are valued in two different ways:
Use-value – This means a commodity has a value of ‘usefulness’ that meets the needs of the consumer. For example, shoes protect your feet, sugar will sweeten food, etc.
Exchange-value – This refers to the relationship between the different values of different commodities; one commodity is equal to another amount of any other commodity. For example, a barrel of wine may be worth ten barrels of fish, 50 kilos of sugar or ten pairs of shoes.
Use-values are not dependent on markets or any other system of exchange: sugar will always be useful for its sweetness. Exchange-values are dependent on market forces. A barrel of wine may be worth only nine barrels of fish one week and 11 barrels of fish the following week. In order to understand how the capitalist makes his profit Marx first of all had to understand, and explain, the rates at which goods are exchanged against each other. What is it about ten pairs of shoes that makes them worth a barrel of wine? Marx believed it was the amount of labour that went into making the product that determined the exchange-value.
Labour must be applied to any commodity to give it use-value: someone would need to catch the fish, salt them and put them in a barrel; a cobbler would have to take leather and make it into shoes. This is what Marx called concrete labour. Each different commodity needs a different amount of concrete labour applied to it: shoes may take ten hours to make or it may take five hours to catch and salt a barrel full of fish.
Because the commodities need to be exchanged, they must have some kind of value in common, a way of working out what they are worth against each other. Marx called what they have in common their ‘value’. The value is in the commodities because they are all products of human labour. Therefore, the exchange-value of the goods can be worked out from the amount of labour that has gone into making the finished product. If a cobbler spends ten hours making shoes and a fisherman takes five hours to collect a barrel of fish then a fair rate of exchange would be two barrels of fish to one pair of shoes.
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Insight
Marx does not take into account the concept of fashion or the more modern concern with designer labels, ‘coolness’, and the aesthetic aspects of consumer desire in his concept of value.
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This is a very simple theory that doesn’t take into account the cost of raw materials, the difficulty of the job or the skill of the worker. For example, an apprentice cobbler may take 20 hours to make a pair of shoes but this does not make the shoes more valuable. The labour theory of value depends on how much labour it takes to make a product on average or, as Marx called it, the ‘socially necessary’ labour time.
MONEY AND CAPITAL
In a capitalist economy goods are not usually bartered or exchanged in this way. We use money to buy products from the shops or markets. Money represents the value of goods and is a useful means of exchange. Money appeared in societies that existed before capitalism but not all money is capital. Capital is money that is taken into circulation in order to make more money. In Marxist terms capital is money to which surplus value accrues.
Marx puzzled over the way in which the capitalist was able to extract this surplus value; in other words, what is the means by which a capitalist makes his profit? If labour is a commodity then, like other commodities, it should be exchanged for its value. The capitalist who employs a worker for a day should pay, on average, the value of a day’s labour, which will add the cost of a day’s labour to the cost of producing the item. Following the exchange-value of labour theory, the capitalist can only sell or exchange the commodity at a rate of exchange corresponding to the value of the labour that was used to produce it. It would seem impossible for the capitalist to make a profit, so how does he do it? Marx worked out the solution to this problem which had puzzled many economists before him. The answer lies in the difference between labour and labour power.
LABOUR AND LABOUR POWER
A manufacturer of commodities needs to buy muscle power, strength and skill from the worker in order to produce goods over a period of time. This is labour power. It is a commodity with a value. If the value of a commodity is the amount of labour that goes into producing it, how much is labour power worth? Because labour power is the strength and skill of the worker then its value must be the value of the food, shelter, clothing, etc. that it takes to keep the worker in a fit condition to be able to work for a specific length of time. Labour is the actual work that is done – the activity that adds value to raw materials.
When a capitalist hires a worker his labour power becomes labour which belongs to the capitalist. The worker is paid for his labour power at an hourly rate but what he is actually giving is his labour. There is a difference between the value of the wage wh
ich the worker receives for his labour power and the value which is created by his labour. This is the surplus value which belongs to the capitalist.
SURPLUS VALUE
Finally we get to the explanation of Marx’s discovery: how the capitalist makes a profit from his workers. The capitalist pays the worker for a day’s labour power and gains wealth because the worker always gets a fixed amount for his labour power regardless of the profit the capitalist makes from his labour. This is more easily understood by using an example.
If the cost of keeping a worker alive for a day is £1 and his working day is ten hours then the exchange value of ten hours labour is £10. In a factory a worker may be able to add £1 to the value of raw materials in eight hours. The worker has earned his wage in eight hours but the capitalist has bought ten hours of labour power so he is able to make a profit from the last two hours of the worker’s day. This profit is multiplied by the number of workers in the factory. In effect the capitalist gets the use-value of the worker’s labour power but pays only the exchange-value; the worker is getting a wage where the value is less than the value actually created by their labour. This could only occur because the capitalist economic system was unique in history: by historical and social accident the ‘means of production’ had come to be owned by one class, the bourgeois capitalists. This gave them the advantage over the workers who were virtually forced to sell labour on the open market in order to live. Their only alternative was to starve. In any society people have to do some kind of work in order to live, but it is only under capitalism that one class extracts surplus value in this way. In the long term this has an important relationship to the length of the working day.
