1. Historical Materialism.
     Marx proposes a theory of historical development that bases the motor of social change on the means of production. (As opposed to the goals/decisions of actors).  The major events in history are to be determined as a function of the various interests that follow from a given means of production.  Thus when in the Manifesto Marx says "All of history is the history of class struggle" he means just that:  Class struggle follows directly from the MEANS of production, and is the very source of history.
     Various events may lead to the downfall of a given system, but often the seeds of  a system's destruction are built into the system.  Thus, the feudal system was incapable of dealing with population growth and the ever decreasing distribution of land.  And, this lead to a system which was vulnerable to the introduction of New systems: Namely the move from whole shop production (i.e. guild style) to factory and industrial production. (in fact, Marx also argues a less deterministic route: that feudalism simply was unable to deal with the historical accident of steam power and mechanistic production).

     Just as feudalism held it's own contradictions, and thus came to it's own demise, so too does Capitalism.  The purpose of Capital (and also Wage Labor and Capital) is to lay out the foundations of these internal contradictions.

The central question of Capital as a whole is how is profit possible if everything is exchanged for exactly what it is worth?  How in the system as a whole, can profits ever be gained?

2) Wage Labor and Capital: The argument

   Marx's strategy:
          1) Start with the purest of Capitalism's.
          2) Describe the essential elements of capitalism,
          3) Describe how these interact
          4) Describe the necessary contradictions inherent in the system of capital, and thus describe how it will self-destruct.

    KM's strategy is to show that under the best of all possible capitalist worlds, the system must eventually fail - the system itself is self-contradictory (i.e. it contains within it elements that must lead to the destruction of the whole).

Marx starts this piece by asking, What are Wages?

a) Wages are what the worker is paid for his labor power.

[At this point marx can’t help but get a little off track, and he thus returns to the themes of the last reading: the alienating effect of selling one’s labor]
 

•  Labor-power is the commodity that the worker sells.  Why sell this commodity?  If he doesn’t, he starves.
• However, by selling his labor-power, the worker gives up his life-activity (recall species being here from before).  “But the exercise of labor power, labor, is the worker’s own life-activity, the manifestation of his own life.  And this life-activity he sells to another person in order to secure the necessary means of subsistence.”  … “He works in order to live.” (p.204).

 We know that they are what the laborer is paid for working.  How is the price of a wage set?

 “Within these fluctuations, however, the price of labor will be determined by the cost of production, by the labor time necessary to produce this commodity – labor power.”

 Marx is using a very important point that he develops fully in Capital:  This is the labor theory of value.  According to this theory, the value of a good is equal to the amount of labor that goes into making it.  Thus the final determinant of the price of all goods is the amount of labor needed to create it.

“Now that we have arrived at an understanding of the most general laws which regulate wages like the price of any other commodity, we can go into our subject more specifically.” (p.206)

III.

The point of this section is to describe what capital is.

One view (the economists that Marx is arguing against) says that capital “consists of raw materials, instruments of labor and means of subsistence of all kinds, which are utilized in order to produce new raw materials, new instruments, and new means of subsistence.” (p.207).

All of these things are creations of previous laborers, thus Marx refers to them as ‘accumulated labor’ .

Marx says, however, that the things created by labor only become productive capital under certain relationships.

Capital consists primarily in the social relations of production.  The goods themselves mean nothing.  It is only when they are exchanged that they matter.

Thus he says that:

 “Capital consists not only of means of subsistence, instruments of labor and raw materials, not only of martial products; it consists just as much of exchange values.  All the products of which it consists are commodities.  Capital is, therefore, not only a sum of material products; it is a sum of commodities, of exchange values of social magnitudes.

A commodity:  is an object outside us, a thing that by its property satisfies human wants of some sort or another, that is exchanged for other goods that have use-value.

“Products which are exchangeable for others are commodities.” (p.208)
     "To become a commodity a product must be transferred to another, whom it will serve as a use-value, by means of an exchange." (Capital, Vol. 1)
     "A thing can be useful, and the produce of human labour, without being a commodity.  Whoever directly satisfies his wants with the produce of his own labor, creates, indeed use-values, but no commodities.  In order to produce the latter [commodities] he must not only produce use value, but use values for others, social use-values.” (Capital, Vol 1)

     Use-value is the satisfaction of wants that a commodity can provide.  The use value of a coat is to keep us warm, of food to sustain us, etc.  Marx points out that this use-value can be EITHER from necessity (i.e. sustenance) or 'fancy' such a s fads/etc.  [Note that the concept of Use-value, can be transformed into the language of modern-day neo-classical economics to DEMAND.  The DEMAND for a good is (roughly) equal to it's use value].

Exchange values refer to the rate at which we can trade a quantity of one item for a quantity of another.  Whereas use-value is a subject of the QUALITY of an item, the exchange value has to be a relation of BOTH qualities, but mainly, QUANTITIES .

“The particular ratio in which [commodities] are exchangeable constitutes their exchange value, or when expressed in money, their price.” (p.208)

But of what does VALUE consist?  Where does the exchange value come from?

“How then, does any amount of commodities, of exchange value, become capital?” (p.208)

Like all value for Marx, it comes from the labor put into the object.

"As use values, commodities are, above all, of different qualities, but as exchange-values, they are merely different quantities, and consequently do not contain an atom of use-value."

When we leave out USE-value, what can two commodities have in common?  "That of being produced by labor."

Commodities then consists of the congelation of homogeneous human labour [Capital p.305]  THIS IS THEIR VALUE.

"We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour-time socially necessary for its production." [Capital p.306]

How then, do commodities become capital?  Through the living power of labor.

“Capital does not consist in accumulated labor servind living labour as a means for new production.  It consists in living labor serving accumulated labor as a means of maintaining and multiplying the exchange value of the latter.”

• Wages: the amount paid to the worker for his labor-pwer
• Labor-power:  the creative capacity of the worker, when it is used it is called labor.
• Exchange values:  The amount that something is worth, which must be equal to the amount of labor put into it.
• Commodities: Things that are exchanged for other things, they consist of accumulated labor in exchange.
• Capital: exchange values in production, through the process of labor.   It is the things used to produce new things, which has to include labor.

“What takes place in the exchange between capitalist and wage worker?” (p.209).

When a worker works, he is paid his value – as a commodity.  That is, he is paid a wage that is required to produce the laborer. However, he produces more value than he consumes.

     The problem is that if everything is traded for the cost that it takes to produce it, then where would we ever get a profit?  The answer, Marx gives, is that  that there is one difference between HUMAN labour power as a commodity, and that of every other non-human commodities.  The cost of producing a human being (i.e. it's sustenance" might not necessarily be equal to the amount of value that a worker can PRODUCE in a given day.  Thus, if it takes 6 hours of labor time to provide for sustenance, then the remaining hours of work time (6 or so in Marx's day) are SURPLUS -- they are the value over-and-above costs that the worker produces.

     Thus, profit is the stolen surplus value of the laborer.

What about growth?  Growth allows the capitalist to produce more, and thus he could pay is worker more.  As Marx says,

“To say that the worker has an interest in the rapid grown of capital is only to say that the more rapidly the worker increases the wealth of others, the richer will be the crumbs that fall to him, the greater is the number of workers that can be employed and called into existence, the more can the mass of slaves dependent on capital be increased.” (p.211)

Marx next asks how the growth of productive capital affects worker wages.
Start by looking at the industrialist side:

1. Growth will lead to and increase in competition.  As more people try to get more of the goods.
2. Growth allows for the production of more powerful machines, more efficient division of labor, to ‘bring to bear on the industrial battlefield.”
3. Now creeps in the logic of competition:  One capitalist can only increase his share if he drives another out of the system.  He can only do that by selling his goods more cheaply than his competitors.
4. To sell more cheaply, in a Marxist world, you have to decrease the amount of labor that goes into a good.
5. You do that by increasing the division of labor and employing bigger, better machines. (which results in a rivalry among capitalists to expoit the worker even more).
6. This privileged position, of being the cheapest seller, only lasts a short time.  Then the competitors copy the new innovation, and drives the price down yet again, and we are back to where we started, and a new round will begin.

Note: in each round, only the bigger more efficient firms survive, and many are thrown out (increasing unemployment).

Thus competition necessarily drives out profits, and brings the price down to the level of production costs.

Now from the worker side?  How does this affect workers?

1. Division of labor dumbs down the work, thus making it less expensive (recall the training portion of the work), and thus lowers the wage. [think about McDonald’s fry cooks]
2. Workers are engulfed in a competition among themselves, to sell their own commodities (just like the capitalist). Thus to produce a family, they may put the whole family to work instead of just the man.

     1) Competition among workers.  The fact that there are more workers than their are jobs pushes wages down – the army of the unemployed.
     2) Competition among employers pushes wages up, which also destroys profits.  Why?

Bidding war for workers. As capitalists seek to expand they look for more workers, and they start to become a proceed commodity.  This eats up profits.  THUS, it looks like (in a pure system) profits will disappear again. How do we save them?

Marx says that this kind of cycle will continue until you get a CRISIS -- a depression, a bust, etc, at which points huge waves are thrown out of work and the unemployed army again lowers wages.

     This boom and bust cycle continues, with each successive bust getting bigger (because only the biggest firms survive the previous round, and they buy up the pieces of the little companies), until a final absolute collapse.

The only way out is that the entire economy must grow.  This model of perpetual growth -- and ever increasing productivity --  is something that Marx didn't see happening, but that current economics depends on.