Marx

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A model of exploitation and value The value of the gross product is assume dto be equal to the labor directly and indeireclty used to prodduce it. The value of the net product is equal to the labor direclyt applied and is called living labor. The value of constant capital is the same as teh labor employed indireclty and is called the dead labor. Assume one commodity is produced (corn) by means of itself and labor. Z is the labor value of a unit of corn, l livign labor, k input of seeds, and v value of labor poewr, ie the labor used to produce the corn paid as a wage to one unit of labor. The vlaue of gross and net products are respecitvley equal to: z=l+zk and z(1-k)=l

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2) he was also aware that some types of production required that workers expend considerable time in the acquisition of special skills, wheras other work processes could be performed by simpel unskiled labor. In this case, the computation of values would require taht skilled labor be reduced to simple multiple of unskilled labor. having thus established the connectoin between the exchagne value of a commodity and the amount of the labor time socially necessary for its produciont, MArx showed the specific histroical socail conditions were necessary in order for the products of human labor to be commodities

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Although MArx hated capitlism he paid tribute to the great increase in producvity and produciont that it unleashed. But it too faced internal contradiciont that produces class struggle and eventually it was overthrown. Under capitlism MArx said the techniques of produciotn became increasingly concentrated and centralized and the system of private ownership of capital became a barrier for further progress. An incresing amount of unemploymnet and miserization of the working class transpired causing workers to revolt. The stae was instrument of force used by capitalists against workers. But the working class prevailed overthrew the bourgeois stae and stablihsed its own dictatorship.

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Because each producer depended on the products of other producers there was a definite indispensable social relationship among producers Each producer, hoever, produced only for sale in the market. What socail relationships were among producers appeared to each producer as simply a relationship between the individual and impersonal, immutable social institution-the market. The market appeared to involve simply a set of relationship among material things-commodities. Thus, in a commodity producing society, the use values produced by useful labor could not be comsumed and enjoyed without the successful functioning of the market exchange.

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Circulation of capital and the importance of produciotn. The fact that surplus value was created in the sphere of producitn could be ascertained if one carefully examined the process of circulation of capital. In the money-commodity-money' formula it was clear that the process of profit making that was being described was that of a merchant capital Nneither merchant capital nor interest bearing money capital was invovled in the process of the actual creation of surplus value. Both these formulatoin of capital were essentially parasitic. They could attach themselves to whatever mechanism was being used for the creation and expropriation of an economic surplus. After this attachment, merchants and moneylenders could gain a share of teh surplus even though their capital had not been directly involved in the creation of this surplus

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Commodities, value use value, exchagne value Marx was interested in explaining the nature of the social relationships between capitalist and laborers, in otehr words, he wanted to expalin teh relationship between wages and profits. Capitalism was a system in which wealth appeared as an immense accumulation of commodities, its unit being a single commodity. Commodities had use values and exchange values. Use value is a thing that satisfies human wants. Exchange value was a ratio of how much of that commodity cone could get in exchagfne for a given amount of some otehr commodity or comodities. It is usually expressed in terms of teh money price of commodity. Money was a special commodity that was generally used as a numeraire. It was used as a medium of exchagne and it was also a means of holding wealth.

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Constant capital variable capital and the rate of surplus value. Constant capital c defined as tools, machines, buildings and raw materials--all nonhuman means of prodcuiotn. It was called constant because these commoditeis trasnferred only therir own value to the value ofthe final product. Variabel capital V is defined as teh labro power that the capitalist purchases. Its value increases when the potential labor purchased becomes actual labor embodied in a produced commodity. At first capital=v+c. When teh process of production is finished we get a commodity C' whose value=v+c+S, where S is the surplus value

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Marx maintained that goods are exchagned at produciotn process which are prices determiend in such a way as to guarantee a uniform profit. In general, the ratio between production prices of two goods do not coincide with the ratio of quantities of labor embodied in them

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Exchange value presupposes a common element in all commodities by virtue of which comparisons can be made In addition to exchagne value commodities had two otehr comon characeristics: 1) use value, 2) being produced by human labor MArx rejected use value as a possible determinant of prices. As use values comoditeis are of different qualities. They were primarily relations between particular individulas and material things. Exchange value, however, existed in very specific social circumstances. It has to involve some aspect of the social relations peculiar to those social circumstances. Qualities that gave commoditeis use value were neither direclty comparable nor reflective of social relations peculiar to capitalist soceity. Use value thus could not be the basis for exchagne value.

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Exploitation and value Marx analyzed exploitation by using the labor theory of value. Surplus value is produced by labor an dlabor only. He believed that different social structures had succeeded one anotehr through history could change the form in which surplus product appears (i.e. profit in the capitalist economy and in the feudal economy) but could not change the substance. And in substance value is labor and surplus value is labor

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Exploitation in the produciotn process The conditions of exploitation havae to do with control of the produciotn process. The sale of labor power to the capitalist boils down to the worker assuming an obligation to obedience (formal submission of worker to capital.) Exploitaiotn arises out of the fact that the capitalist exercises command to make the workers produce a higher value than he pays them as wage. The capitalist wihtou altering the produciotn process obtains absolute surplus value. But labor can be reorganized technically so as to make the workers produce more. In this way labor becomes part of the technical apparatus in which the capitalist investment is realized, and can be trasnformed through technical progress. This is what MArx called real submission of worker. Exploitation is heighened with the extraction of relative surplus value, in otehr words, by increasing labor productivity thorugh technical progress.

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Exploitaton and value Marx analyzed exploitation by using the labor theory of calue. Surplus value is produced by labor and labor only. He believed that different social structures had succeeded one another through history could change the form in which surplus product appears (i.e. profit in the capitalist econmoy in teh feudal economy) but could not change the substance. And in substance value is labor and surpuls value is labor.

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Finally an exchange ecnomy also appeared as a system in which actions motivated by pure, egoistic self interest wer channeled as though by an invisible hand into a socially harmonious whole. The motive to exchagne clealry presupposed that individuals did not produce or own what they desired or needed. Only the difference exchange. Marx stated that the appearance of harmony was thus inevitable. Thus, the economic harmony of capitailsm was only visible when one accepted the assertion that there exists only one single economic relation-exchange.

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For a society to be primarily commodity producing society three historical prerequisites are necesary: 1) Productive specialization, such that each producer continuously produced the same thing 2) such specialization required teh complete seperation of use value form exchagne value. Because life was impossible without the consumption of innumerable use values, producers could relate to his product only as an exchange value and could only acquire his necessary use values from the products of other producers 3) well-developed markets, which required pervasive use of mone as a universal value equivalent mediating every exchagne.

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Fundamental command relation in capitalist produciont is based on power. It is onl because capitaists have this power of command that workers can be constrained to produce more than they receive as wages

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If P represents production, we have money-commodity...P...Commodity' (which exceeds commodity)-money', where the dots indicate that the process of circulation is interrupted by productoin. Thus the origin of surplus value was due to the fact that capitalists bought one set of commodities and sold an entierly different set. The first set (commodity) is teh ingredients of production, the second set commodity' was the output of the production process

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If exchagne took place below the value of the comodity the buyer's gain would be identical to the seller's loss and no surplus value would be generated, similarly, if it is sold above its value, seller's gain would be buyer's loss. Thus Marx concluded that the essential feature of capitalism that gave rise to surplus value, or profit, would not be found in the sphere of circulatoin and he turned his attention to the sphere of production.

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If l is a working day, yl represents the number of hours workers work for themselves, and l-yl is teh number of hours they work for the capitalists. q=surplus labor/necessary labor=surplus labor/variable capital The rate of exploitaitno or of surplus value q is equal to: q=S/V=(l-yl)/yl=(1/y)-1 When the workers spend the whole working dya workign for themselves, ie when y=1, exploitation vanishes. Profts, interest and rents are merely the divison of suprlus value among the capitalist class.

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Industrial capital was the form of capital that was most representative of teh capitaist mode of production. It constituted the mechanism by which surplus value was both created adn expropriated in capitlism. Industrial capital could be depicted in three stages: 1) the capitalist appears as a buyer, his money is transformed into commodities 2) Productive consumption of the purchased commodities by the capitalist. He acts as teh capitalist producer of commodities, his capital passes through the process of producion. the result is a commodity of more value than that of the elements entering its produciotn. 3) The capitalist returns to the market as a seller; his commoditeis are turned into money.

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LAbor theory of value and thr transformation problem A commodity has both a use value and value. Use value of a commodity consisted of its physical and chemical properites which could be put to certain human uses. A commodity's value was entirely the outcome of the specific historical social circumstances in which it was produced. Produciont was a social process of interdependent producers, organized socially. Labor or producing was both a set of activities and a set of social relations. Valeu was an aspect of produced object that reflected social relations that were specifc to the capitalist, commodity producing society within which the object was produced as a commodity.

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Labor power and definition of capitlism Labor power refers to person's ability to work and produce commodities. It is itself a commodity that is bought and sold in teh market. Its use value is the performance of work-the actualiztion of potential labor. When work is perofmed it beocmes embodied commodity thus giving the commodity value. Therefore, the only possible source of surplus value was the difference between the value of the labor power as a commodity (or potential labor) and the value of the commodity produced, which embodied thae actualized labor (or the consumed use value of the labor power) Labor power is unique commodity: its consumption or use created new value large enough both to replace its original value an dsurplus value

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M' exceeds M by exactly the same amount that C' exceeds C. Only exchagne of value equivalnet had taken place, but now the capitalist had a fund money of capital that was greater than the orignal fund The apitalist now was in a position to begin the process again, only this time on an expanded scale with more capital. Capitalism represented scaled with more capital. Capitalism represented a enver-ending repetition of this process. Capital created surplus value, which was the source of more capital, in turn more surplus value and so on, and in an endless, ceaseless drive to accumulate more capital. The credo of capitlism was accumulate adn accumulate.

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MArx saw society evoling in six stages. In primitive communsim there were no antagonistic classes, and no exploitation. Land was held as common property. Surplus was not created. Gradually the efficincy of produciont rose to the level where the worker could prudce more than their subsistence, and slavery become profitable. Exploitation and class struggle arose. Slavery permitted higher development of the productive force,s but eventually it became a barrier to further progress. Slaves were not the most highly motivate workers, and slave rebllions shook society and tore it apart.

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MArx's definiton fo value must not be confused with the writings of those taht preceded him. (They simply meant exchagne value or price). For marx, value is a qualitative social relation with a quantitative dimesnion. Value exists historically ony when productive labor is not immediately social. In otehr words, even though you consume the product I produce we have no consciousness of our interdependence. For you my social labor exits in teh form of the commodities in which it is embodied, that is only as a value. The qualitative dimension of value is this particular social relation.

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Marx defined the surplus value in teh following passage Since on the one hand, the values of the variable capital and the labor-power purchased by that capital are equal, and teh value of this labor power determins the necessary portion of the working day; and since, on the other hand, the surplus value is determined by the surplus poriton of the working day, it follows that surplus value bears the same ratio to variable capital that surplus value: S/V=surplus labor/necessary labor The rate of surplus value is an exact expression for the degree of exploitation of labor power by capital, or the laborer by the capitalist.

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Marx's critiques of classical economics They lacked historical perspective. Had they not, they would have discovered that production is a social activity that can take many forms or modes, depending on the prevailing forms of social organization and their corresponding techniques of production They did not discover that all modes of produciotn have common traits and characterisitcs. But as indispensable to production as some of these characteristics were, the first step towards understanidng any one mode such as capitalism was to isolate the features that were essential to and particular to that mode of production.

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Marx's critiques of classical economics MArx's theor of history Commodities, value, use value, exchagne value Useful labor and abstract labor Social nature of commodity produciton Simple commodity circulation and capitalist circulatoin Circulatoin of capital and the importance of production Labor power and definition of capitlism

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Marx's theoyr of history In every historical epoch the prevailing methods of forces of production produce a set of relations of produciotn that support them. But he material forces of producitoin (technology, types of capital, skill level of labor) are dybamic; they are continuously chaning. The superstructure, consists of art, philosophy, religion, literature, music, political thought and the like. All elements of superstrucutre maintains status quo. For marx, history is a process through which the static relations of production (thesis) come into eventual conflict with the dynamic forces of produciotn (antithesis). The result was that conflict revolutionizes the sytem so that new relations of produciotn (synthesis and new thesis) permit the higher devlopment of forces of produciotn. The mechanism for overthrwoing old societies is class struggle.

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Necessary labor and surplus labor and creation and realization of surplus value Labor power is the capacity to wkr. The upper limit of human being's capacity to work is, depending on the type of work, fourteen to eighteen hours a day. Therefore the quanityt of actual labor that can be extracted from one day's labor power (an hence teh value of commodities produced by one days' actual labor) depends on the length of the working dya, which is not a constant. If the length of the working day is such that the value paid by the capitalist for the labor power is replaced by an exact equaivanet, it is simply a process of producing value; if on the otehr hand, if it continues beyond this point, it hten becomes a process of creating surplus value.

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Only under two conditions (K(c)/K(k))=p(c)/p(k): r=o but that is irrelevant since in a capialist econmy profit must be positive. The second is l(c)/l(k)=p(c)/p(k)

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Outline The value of labor power Necessary labor and surplus labor and creation and realization of surplus value Constant capital cariavle capital and the rate of surplus value exploitation in teh produciotn process exploitation and value a model of exploitation and value the transformation of values into prices Formulation of teh transformaiotn poblem using constand and variable capital variables

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Private property, capital and capitalism Capitalist accumulation Economic concentration Wages Sectoral imbalances and economic crisis cycles falling rate of profit

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Simple commodity circulation and capitalist circulation In a simple commodity produciotn in a non-capitalist system commodities were produced for sale in order to acquire otehr commodites to use. In such a system teh circulation we see is commodity-money-commodity In contrast in capitalist system for the capitilaist the process of exchagne was very different. In capitalism alng side the previous circulation we see a circulation that takes the form of money-commodity-money, where money is higher than money. In otehr words, this form of circulation is buying to sell dearer. Money that circulates in this manner is thereby transfomred into becomes captial and is already potentially cpaital.

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Social nature of commoidyt produciont Products of human labor are commodites when they are produced solely for exchagne for money in the market and not for immediate use or employment of the producers or anoyone directly associated with producers Commodity produciotn is not the characterisitc form of social production until workers do not produce the products for their own subsistence, but must purchase them from capitalists. This is the source of capitalists power over worekrs in a commodity producing society.

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Surplus value, exchagne and sphere of circulation the difference between money' and money was surplus value. To Marx, the quest for even greater quantities of surplus value was the motive force propellin gthe entire capitalist system. MArx concluded that money-commodity-money' was in reality taht general formula of capital as it appears prima facie within the sphere of circulatoin. The central quesoitn to marx was if the essential feature of capitalism that gave rise to surplus value could be found within the sphere of circulation If equivalnets are exchagned there is no surplus value.

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The existence of labor as commodity depends on two essential conditison First Labor power can appear upon the market as a commodiyt, ony if, and so far as, its possessor...offers it for sale...as a commodity. In order that he may be able to do this he...must be the untrammeled owner of his capacity for labor, i.e. of his perosn...The owner of the labor power ...[must] sell it only for a definite period, for if he were to sell it sump and stump, once and for all, he would be selling himself, converting himself from a free man into a slave, from an owner of a commodity into a comodity.

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The labor that creates the exchagne value is abstract labor, where differences in teh qualities of vaiorus kinds of useful labor were abstracted away When Marx asserted that abstract value determines exchanges value, MArx had two important qualifacaitons 1) it is only the socially necessary labor time that counts. "The labor time socially necessary is that required to produce an article under normal conditions of produciotn, and with the average decree of skill and intensity prevealent at the time"

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The only element that is common to all commodities, direclty qualitatively comparable, and an integral part of capitalist social relatoins, is teh labor time required in production. Labor is a universal element in all social produciont and not specific to capitalist social relations. The labor that created exchagne vlue of comoditities, however, had qualitative aspects (which we will discuss later) that were specifically the consequecne fo capitilst social relaoitns When marx considered commodities abstractly, ignoring all differences and peculiarities, they reduced to the material embodiment of labor expanded in produciont. Commodities so considered were defined as values by Marx.

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The portion of the working day during which the produciotn of labor power takes place is necessary labor time, and the labor expanded during that time is necessary labor. In capitalism the workgin day always extends beyond necessary labor time. This extended portion of the working day is named surplus labor time, and the labor expanded during that time is suprlus labor. Let us recall M_c...P...C'-M'. C' exceeds C by an amount exaclty equal to the ecess of the length of the working day over the necessary labor time required to produce the laborer' subsistience. This is why Marx insisted that the commodity labor power was the only source of suprlus value

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The relative labor values and relative prices are respectivley • z(c) / z(k) = {l(c )+ l (k) [k(c )/(1-k(k)]}/ {l(c ) + [l(k)/(1-k(k))]} • p(k) = w. l(k) + p(k). k(k) (1+ r) • p(c) = w. l(c ) + p (k). k( c ) (1+ r) • p(c ) /p(k) = [l(c )/ l(k)] [ 1 - k(k) (1+ r)] + k(c ) (1+ r)

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The second essential condition...is...that the laborer instead of being in the position to sell commodities in which his labor is the incorporated must be obliged to offer for sale as a commodity that very laborpower, which exists only in his living self In order that a man may be able ot sell commodities other than laborpower, he must of course, have the measn of produciotn, such as raw materials, implements, etc. For the conversion of his money into capital, therefore, the owner of money must meet in the market with the free laborer, free in teh double sense, that as a free man he can dispose of his labor-power as his own commodity and that on the other hand he has no other commodity for sale, is short of everything necessary for the reaelization of his labor power

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The specific quality of capital under capitilism was the power of capital to yield profits to a special social class. Only in capitilsm were instruments of production and stored bup labor the source of the incomeand power of the dominant social class. MArx sought to understand how this aspect of capital came into existence and then how it was perpetuated. MOst economists prior to Marx had believed that property was sacrosanct. Furthermore they identified property in general with its existing form as capitalist pricate property. Marx objected to this. There were innumerable forms of property. Marx insisted that each particular mode of produciont had its particular forms of property, and these forms of property determiend distribution. (For example common property)

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The substance of the value was some specific quantity of private labor that could be transformed into social labor only through the sale of teh commodity Corresponding to the distinction between the use value and the value of a commodity was a distinciotn between useful labor and abstract labor. In capitalism the capitalist was concerned only about value through sale in the market. The capitalist was hrign workers to produce commodities only to yield value in exchagne, in order that part of this value would accrue to the capitalist as a suplus value or profit.

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The system was replaced with feudalism. According to MArx it is a unique system because the exploitation of the serf is most visible. Serfs were allowed to work a few days per week on the land assigned to them but were forced to work a few days per week on the land assigned to them but were forced to work the other days on the landlord's land. This was an obvious exploitation. Since serfs had a greater incentie to work than slaves feudalism brought a higher produciton. But the ssytem finally limited further progress (prduction was not efficient) and it was superseded by capitalism.

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The transformation of values into prices A capital good and a consumer ood are produced. K(k) and K(c) are quantities of good used to produce one unit of capital good and one unit of consumer good respectivley, l(k) and l(c) are inputs of living labor, z(k) and z(c) are the labor values, p(k) and p(c) the monetary prices of production, w the money wage and r the rate of profit. We have z(k)=l(k)+z(k). K(k)=l(k)/(1-k(k))=l(k) z(c)=l(c)+ z(k). k(c ) = l(c) + l(k) (k(c )/(1-k(k)) found by substituting in z(k) = l (k) / (1- (k(k))

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The value of finished goods came from three sources: raw materials the tools and labor power. The values of raw materials and tools are determined by the labor already embodied in them. The final product contains all the embodied labor in the produciotn of inermediate good such as wool that enters into cloth produciotn. It was different, however, with labor power. Suppose the length of the workgin day is higher than what is needed for the subsistence of workers The value of the commodity C' exceed teh value of the commodity C by an amount exacly to the excess of the lenght of the working day over the necessary time required to produce the laborers' subsistencel

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The value of labor power Labor power was merely potential labor. This was what the laborer sold as a commodity. The use value of labor power was actual labor expended. Marx states The value of labor power is determined as in the case of every other commodity, by the labor time necessary for the produciotn and consequently also the reproduction of this special articlle. Given the individual, the produciotn of labor-power consistsin his maintenance. For his maintenance he requires a given quantity of the means of subsistence. The labor power withdrawn from the market by wear, and tear and death, must continually be replaced. Hence teh sum of the means of subsistence necessary for the laborer's subsisttues i.e. his children

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The value of labor power was equal to the value of the subsistence of a workers family. Therefore the labor embodied in labor power was identifcal to the labor embodied in teh commodities comprising his subsistence. This subsistence was not a biological or physciological minimmum subsistence but a product of historical development that depended on the habits and degree of comfort to which the working class was accustomed.

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The wage differences between occupatoins reflected the fact that special education and training was required for some occupations. The expenses of this educaiton entered into the total value of various types of labor power. By calculating the labor costs of the various education and training requrements if different occupations, all labor could be reduced to some multiple of simple labor. When each worker works only to meet his subsistence needs there would be no surplus value created

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This failure to differentiate between those characterisits of production that were common to all modes of production and those that were specific to capitlism led to innumberable confusions and distortion. First was the belief that capital was a universal elemnt of all production processes. Second, was that all economic activity could be reduced to a series of exchanges. The misidentification of capital stemmed from the fact that capital had one feature that was universal in all production and one feature particular to capitlism. Marx stated that production was not possible without instruments of produciton, nor could there be production without stored up past labor.

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This, then is capialisms defining feature, differentiating it from a simple commodity producing society. Captialism exits when, in a commodity producing society. Capitalsim exits when, in a commodity producing society, one small class of people-capitalists has monopolized the means of production, and where the greater majority of the direct producers-workers-would not produce independently because they have no menas of production. Capitalism is neither eternal nor natural. It is a specifc historical condition and that has a ruling class that rules by virute of its ability to expropirate surplus value from the producers of commodities.

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Under socialism private property in consumer goods is permited, but the capital and land are publicly owned by the central government local authorities or cooperatives promoted and regulated by the state. Produciton is planned as is the rate of investment, with the profit motive and the free market eliminated as guiding forces of the ecnomy. The dialectical process continues until finally the state withers away and pure communism prevails

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Useful labor and abstract labor When Marx asserted that labor time determined exchagne values, he defined this labor time as consisting of simple homogenous labor, in which all specific differences among differt types of work processes were abstracted away. When one looked at the specific characteristics of specific work processes one can say that their particular differentiating qualities were necessary to produce the particular use values of the different commodities involved. Labor looked at this was defined as useful labor. Useful labor is the cause of commodities having use value.

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Value also had a quantitative dimension. "The value of one commodity is to the value of another, as the labor time necessary for the produciotn of the one is to htat necessary for the produciont of the otehr."

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When bourgois economists using Marx's term accepted existing capitalist property rights as universal, eternal and sacrosanct and viewed capital as common to all production, the institutions that in MArx's opinion were the distinguishing forms of capitlism were put outside the purview of their analysis. Then what was left for them to analyze was exchange. All economic phenomena were reduced to acts of buying and selling commodities. The entire focus was on exchagne or sphere of the circulation of money and commodities. The commodiites were seen simply as the embodiment of an exchange value. When a worker's labor was viewed simply as a commodity, ahving exchagne value like any other comodity, then all ecnomic, social and political distinciton among individuals disappeared. A kind of abstract equality among individuals appeared.

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With thte intial money capital M the capitalist buys raw materials, tools and labor power. During the process of produciotn the capital is transformed into finished goods (capital tehn became embodied in finished goods)

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y is the value of labor power v=yl is variable capital (necessary labor), constant capital C=zk Surplus value S=l(1-y). We can now write: z=l(1-y)+yl+zk=S+v+c So, yl is the labor necessary to reproduce labor power, l is living labor, l-yl is the labor appropriated by the capitalist.