Marx- A Complete Introduction

by Gill Hands

  • 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, fifty 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 nine barrels of fish one week and eleven 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. 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.

  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 which 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 £1. 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.

  Marx saw that the working day was divided into:

  • Necessary labour – the time the worker spends actually earning the amount paid in wages. In any society a worker would need to labour for a period of time in order to provide the food, clothing and shelter he requires. The amount of time this takes will vary according to the technology that is available to help him with his work.

  • Surplus labour – the time spent producing surplus value for the capitalist.

  The capitalist can increase his surplus value in two ways:

  • Make the working day longer.

  • Increase efficiency in the workplace so the worker covers the cost of his wages in a shorter time. This means more of the rest of the day is available to produce surplus value.

  ‘The degree of exploitation of labour, the appropriation of surplus-labour and surplus-value, is raised notably by lengthening the working-day and intensifying labour.’

  Karl Marx, Capital, Volume III, 1894, Part III

  https://www.marxists.org/archive/marx/works/1894-c3/ch14.htm

  Profit and the division of labour

  The chief driving force in capitalism is profit. Not all the surplus value the capitalist gains from his workers is profit because he has had to pay for machinery, training, etc. The rate of profit the capitalist receives is variable and he is always looking for ways to improve it.

  The capitalist system differs from past production methods by using a way of working called the division of labour. This is the use of mass production systems within the workplace so that a process is split into a number of repetitive tasks. Our old friend the cobbler would have taken the leather through every process until he finished with a pair of shoes. In a factory machines do the work in a number of different stages. One machine cuts the leather, one sews it, one shapes it, etc. This improves the capitalist
’s profits:

  • One worker can do the work of several others. This will increase competition for jobs, so wages go down.

  • It makes the work simple and unskilled so there is no need for long apprenticeships or training.

  • Small-scale capitalists are put out of business because they cannot compete with the low prices of the large-scale manufacturers. They then have to join the workers.

  ‘The emergence of the factory system is not simply a technological development. It is primarily a process of social reorganisation completing the transformation of independent artisans and dispossessed peasants into wage workers. Marx calls this the formal subordination (subsumption) of labour to capital.’

  Ben Fine and Alfredo Saad-Filho, Marx’s ‘Capital’, Pluto Press 2004, p. 81

  However, this increased profit can only be gained in the short term. Once the capitalist’s more efficient and improved production methods have spread to other manufacturers there will be an abundance of his product on the market. This is known as over-production and competition in the marketplace will eventually reduce the price of his commodity.

  The capitalist can solve his problem in the short term by:

  • exploiting old markets more efficiently, for example by advertising

  • opening up new markets, for example by exporting to other countries.

  Marx noted that there is always a tendency for the rate of profit to fall. Increased competition is one of the main factors in this because the capitalist finds he has to invest increasing amounts of capital into his business. Following Marx’s model it was generally believed that all modern economic crises would be as the result of over-production, but the global recession that began in 2007 and led to a huge crash in 2008 included factors such as banking, investments and housing markets.

  Capitalism in crisis

  Marx believed that the capitalist structure of society would inevitably lead to crisis and internal contradictions would eventually lead to its downfall. The main problems that Marx predicted were:

  • Worker’s wages will tend to fall to subsistence level.

  • Profits will tend to fall.

  • Competition will lead to large companies swallowing up small ones; this would be opposed by growing numbers of workers.

  • More people will be forced into the working class.

  • The capitalist system will lead to greater divisions in society.

  • There will be more and more severe economic crises.

  • Capitalism has reduced workers to a degraded condition and these workers will eventually rise up in revolution and overthrow the system.

  Falling wages and profits

  Marx was convinced that capitalism was in crisis. Underpinning this belief was his faith in his dialectical analysis of the economy. He saw the whole of capitalism as inherently unstable because of the dialectical oppositions that made up its structure. If there was an economic ‘boom’ it was certain to be followed by a ‘bust’ or depression. He was also convinced that wages would become lower and lower until they reached subsistence level and that profits would keep falling because in capitalism the price of goods, and the profits made, are dependent to a great extent on the markets and on wages:

  • High wages for workers lead to high prices for commodities, therefore factory owners get low profits.

  • Low wages for workers mean that they are unable to buy enough goods and services to keep the economy viable and this leads to unemployment.

  The economist John Maynard Keynes (1883–1946) made famous one of the internal paradoxes of capitalism that Marx had already pointed out. Each capitalist wants his workers to have low wages so that he can increase his profits, but he wants the workers who work for someone else to have high wages, so that they can buy his products. There is no way that this can happen in the real world and the contradictory desires of the capitalists are part of the dialectical paradox that makes the capitalist system unstable and can lead to recurring economic crises. Balancing these two opposing forces is an important factor in recovery after any economic crisis. Is it better to make wages higher to increase spending and risk inflation? Or should wages be kept low because of the pressures of global competition?

  Social labour

  Another problem affecting profits in a capitalist society is that nobody decides who is going to make what. We saw that use-value is an important part of Marx’s economic theory. The products made have to be ‘useful’ for some human need. But they also have to be useful for some specific need, in a specific place: for example, if you are hungry you cannot eat a pair of shoes. In order for society to function we need all different kinds of commodities. If everyone decides to make shoes, for example, we will all go hungry. So societies need to have some way of regulating who makes what to ensure that enough of the right kinds of commodities are made.

  Spotlight

  Charlie Chaplin, the silent film star, attempts to try to eat a pair of shoes in his film The Gold Rush to emphasize the poverty and desperation of his tramp character.

  Marx called this social production and he pointed out that the capitalist system was unlike slave or feudal societies in this respect as there is no way of making sure this happens. To a great extent, in slave or feudal societies the slave owner or the landowner decided the distribution of labour. They decided what they wanted and who would make it so that it met their needs. In a feudal society, with rural industry, the families who made up the society further regulated the distribution of labour. Some members would grow grain, some would weave, some would make shoes and the labour would be distributed so that it was relevant to age, sex, the seasons of the year, etc. They would be producing commodities that they needed and that they had to provide specifically for those above them in the ruling classes.

  Capitalism, however, is a system of generalized commodity production. Factories are specialized and tend to produce only one kind of product. No producer can meet all his needs from the products of his own factory so he has to sell them as commodities to other people. In this way commodity producers are interdependent on each other.

  Because there is no system of regulating who makes what, apart from market forces, this can lead to problems:

  • It is not possible to tell if the products will be ‘useful’ until they go onto the market. The producer might not be able to sell them. In that case, according to Marx, the labour that has gone into such products is therefore not social labour because it has been wasted. The goods are of no use to society.

  • Manufacturers often compete for the same markets by making very similar products. The most successful will be those who can make them cheaply. Manufacturers can only do this effectively by increasing productivity and undercutting one another.

  In Western economies markets are usually left to find their own level, but certain types of large manufacturing industries, for example car production, may be encouraged by government grants in order to avoid unemployment during an economic downturn.

  Manufacturers do not know whether or not their products will fill a social need in advance and can only determine this by trying to sell them. Because they are interdependent on each other and in competition at the same time this must lead to market fluctuations.

  We saw earlier in the chapter that the price of commodities depends on the amount of ‘socially necessary’ labour time that goes into making them. In the marketplace of generalized commodity production it is difficult to see how much socially necessary labour time goes into making a product. To take the example used earlier, there is no easy way of telling that a fair rate of exchange of products is two barrels of fish to one pair of shoes. Competition between manufacturers and the way that surplus value is extracted means that labour has become abstract social labour and related to money. This is related to the ‘fetishism of commodities’, which is discussed in the next chapter.

  Accumulation and crisis

  We have seen that in a capitalist economy surplus value is acquired from the
workers and becomes a profit. This is not often used by the capitalist to buy another product but is invested in further production. So surplus value goes into producing more surplus value. Marx called this the accumulation of capital and he believed it became almost an obsession for the capitalist. He said the bourgeois class often denied themselves their own consumption in order to invest capital, but he did not believe they were misers, hoarding their wealth just for the sake of it. He believed they were cogs in the machine of competition for they had to reinvest or be overtaken by their rivals.

  ‘Only as personified capital is the capitalist respectable. As such, he shares with the miser the passion for wealth as wealth. But that which in the miser is a mere idiosyncrasy, is, in the capitalist, the effect of the social mechanism, of which he is but one of the wheels.’

  Karl Marx, Capital, Volume I, 1867, Chapter 24, Section 3 http://www.marxists.org/archive/marx/works/1867-c1/ch24.htm#S3

  Marx realized that investment of capital is important to the growth of the economy; capitalists have to plough back parts of their profit into the economy otherwise it will stagnate. However, as the markets are not controlled in any way, if the capitalist cannot sell his product because there is no demand, or if supply exceeds demand, there will be a slump. In this case people do tend to hoard their money rather than reinvest it because profits become very low. This makes the slump even greater. Large amounts of commodities will remain unsold and so the capitalist will not get a profit from his investment. This is a crisis of over-production, which Marx said was unique to capitalism. Under the feudal system economic crises were usually the result of not enough being produced, leading to famine.