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 is to lay out the foundations of these internal contradictions.

[Aside: the other main contribution of Marx is his METHOD looking at struggles through the lens of historical materialism has been a great boon to historians and social thinkers -- though some have argued (of course) that too much 'materialism" and not enough simple human agency is used in social theory].

2) Marx as economist: The Argument of Capital (w. a nod toward Wage Labor and Capital)

-If Marx were only a philosopher or revolutionary, we probably wouldn't play such a large role in the history of social theory. In fact, it's his analysis of capitalism that is his greatest (or at least most influential) contribution.
-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.

II. The elements of Capitalism.

-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?

1) Commodities and value.

-A commodity is an object outside us, a thing that by its property satisfies human wants of some sort or another. [p.303] {44}.
It is something useful that is exchanged.

"To become a commodity a product must be transferred to another, whom it will serve as a use-value, by means of an exchange." {p47-48}

"A thing can be useful, and the produce of human labour, without being commodity. Whoever directly satisfies his wants with the produce of his own labour, 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."{47}

USE VALUE
-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
"...at first sight presents itself as a quantitative relation, as the property in which values in use of one sort are exchanged for those of another sort." [p.304]{45}

It is 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 .

-Marx makes the obvious point:
        That two objects exchanged for each other must share something equal, that is what allows for exchange.  You trade equalities.

but of what does this consist?

- And the not so obvious point:
"Exchange-value is only the mode of expression, the phenomenal form, of something contained in it, yet Distinguishable from it." {45}
 

"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."{45}

-When we leave out USE-value, what can two commodities have in common?

"That of being products of labor."{45}

"Along w. the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labor, human labour in the abstract"

Commodities then consists of the "mere congelation" of homogeneous human labour [p.305]{46} THIS IS THEIR VALUE --

"A use value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialized in ti. How then, is the magnitude of this value to be measured?  Plainly, by the quantity of the value-creating substance, the labour, contained in the article.  The quantity of labor, however, is measured by its duration, and labour time in its turn finds its standard in weeks, days, and hours."{46}

"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." [p.306]

[As we will point out, current theory says value is not a function of human labor. Instead, it is a function of SUPPLY and DEMAND.  It is, I think, fairly trivial to convert the role of labor-theory here to that of supply.  THat is, the more difficult the good is to get (i.e. the more labor it takes to produce) the shorter in supply, and so forth.  THus, while this element of the Marxist theory is incorrect, does it make the overall predictions of the model false?]
 

section 2. the two-fold character of the labour embodied in commodities.

Here KM continues his discussion of use-value and exchange value, to show that not only are the *products* different (i.e. have use-value and exchange value) but that the labor itself can be split into two parts: specific and general.

"To all the different varieties of values in use there  correspond as many different kinds of useful labour, classified according to the order, genus, species and variety to which the belong in the social division of labor.  This division of labour is a necessary condition of the production of commodities, but it does not follow, conversely , that the production of commodities is as necessary condition for the division of labor." {48}

"In a community of commodity producers, [the] qualitative difference between the useful forms of labour that are carried on independently by individual producers, each on their own account, develops into a complex system, a social division of labour."{49}

The other main point to make is that the process of laboring is socially embedded, through exchange.

The two fold character is:

1. an expenditure of human labour- power, and in its character of identical abstract human labour, it creates and forms the value of commodities. On the other hand,
2. all labour is the expenditure of human labour-power in a special form and with a definite aim, and in this, its character of concrete useful labour, it produces use values." [[p312].

The key to the labor theory of value it that the value of a good is equal to the labour put into it, and that is exactly what the price is.
 

The Fetishism of COmmodities and the Secret Thereof.

Here Marx is contrasting what others have said (i.e. "political economy") about where value comes from to where he thinks it comes from.  According to standard economics at the time, Marx argues, value and commodities were produces by the nature of things, particularly LAND and MONEY.  Marx argues that these things can have no value, because they have no vitality - no ability to change.

"A commodity is therefore a mysterious thing, simply because in it the social character of men's labour appears to them as an objective character stamped upon the product of that labour.." {52}

Commodities become CAPTIAL, when they become productive.

"This division of a product into a useful thing and a value becomes practically important, only when exchange has acquired such an extension that useful articles are produced for the purpose of being exchanged, and their character as values has therefore to be taken into account, beforehand, during production." {53}

That commodities are exchanged is a surface illusion, what are really exchanged, according to Marx, are social relations:
 

    Product A    <------------> Product B  (through money, but see next section)
          ^                                        ^
           |                                         |
           |                                         |
    Labor A      < -  -  -  -  - > Labor B
 

In exchanging goods, which by definition must be equal, we are also exchanging labor, which while qualitatively different, must also be substantively equal.

"The determination of the magnitude of value by labor time is therefor a secret, hidden under the apparent fluctuations in the relative values of a commodity" {54}

The process of economic exchange creates a WEB of the social exchange of Labor.  Marx likens this "discovery" to the discovery of gravity.  It's always been there, but never recognized for what it is.

Because people have started with  commodities as fixed values, they have missed this in earlier analyses.  This is particularly hard to see when we consider money as a constant (which he will show later, it is not).
 

"It is, however, just this ultimate money form of the world of commodities that actually conceals, instead of disclosing, the social character of private labour, and the social relations between the individual producers. When I state that coats or boots stand in relation to linen, because it is the universal incarnation of abstract human labor, the absurdity of the statement is self-evident.  Nevertheless, when the producers of coats and boots compare those articles with linen, or, what is the same thing, with gold or silver, as the universal equivalent, they express the relation between their own private labour and the collective labour of society in the same absurd form." {55 Italics added}

The section on p.{56} is a nice treatment of the different types of production.  Here he claims that the essential element of production within the family (on a farm, say) are not commodities.  They are the translation of specific-labor to use-value.  But once we move to a system of free-labor, we have a change in the meaning of work:

    "All the characteristics of Robinson's labour are here repeated, but with this difference, that they are social, instead of individual.  ... The total produce of our community is a social product. One portion serves as fresh means of production and remains social.  But another portion is consumed by the members as means of subsistence.  A distribution of this portion amongst them is consequently necessary." {.56} [here opening the door for questions of distribution & equality]

He also points out that the transformation of direct labor to free labor is an historical process that rests on the complexity of work (see also his discussion in Division of Labor and Manufacture).
 

The General Formula For Capital

This is one of the most important parts of Marx's treatment of the capital exchange process.  It is here that he points out the distinction between using money "as money" -- a medium for the exchange of equivalent use-values and "money as Capital", or as a productive force.  This section really sets up the problem of value and profits, making it possible to ask, "Where does profit come from?".

The argument:
The circulation of commodities is the starting point for capital.  This circulation reduces to Money, and happens in two fundamentally different ways:
 

1. Consumption:  C - M - C.  Here, a person trades a commodity (corn) for money (M) to buy a different commodity (say wheat).  The fundamental property is an exchange of equivalents.  That the exchange value of the two Cs are the same.  Here, money serves simply as a translation for equivalence.  We can imagine a system where there is a large-scale exchange of commodities that never become capital, because they are simply the trading of equivalent values.  Think, for example, of communities that have "barter dollars"  - Ithica NY, for example, has "Ithica Dolalrs"  These are not capital, they do not produce growth in any way.
2. Investment:  M - C - M.  Here we have the buying of commodities in order to sell.  On the surface, this seems like a ridiculous thing to do, because you are trading M for M.  While C - C makes sense in (1), because the use-values are different, M - M seems absurd.  In fact, of course, the difference is in the quantity, not the quality.  That we get M - C - M`, where M` > M.  This is strange, marx says, because why should we trade $100 for $110?.

While these two might seem similar (you could imagine a chain: M - C - M - C, for example), Marx says the two are fundamentally different:

 
"What, however, first and foremost distinguishes C-M-C from the circuit M-C-M, is the inverted order of succession of the two phases. The simple circulation of commodities begins w. a sale and ends w. a purchase, while the circulation of money as capital begins w. a purchase and ends w. a sale.  ... By the purchase of his commodity he throes money into circulation, in order to withdraw it again by the sale of the same commodity.  He lets the money go, but only w. the sly intention of getting it bake again. The money, therefore,  is not spent, it is merely advanced." {61}

The fact of advancement is only to get more money in the end.  That is, M - C - M`, where M`>M.  This is where Marx brings in the concept of Surplus Value.
 

"This increment or excess over the original value I call "surplus value".  The value originally advanced, therefore, not only remains intact while in circulation, but adds to itself a surplus value or expands itself.  It is this movement that converts it into capital." {p62}

He notes as well that the production of Money as Capital has the effect of making it boundless:
 

"The simple circulation of commodities - selling in order to buy - is a means of carrying out a purpose unconnected w. circulation, namely, the appropriation of use values, the satisfaction of wants.  The circulation of money as capital is, on the contrary, and end in itself for the expansion of value takes place only within this constantly renewed movement.  The circulation of capital has therefore no limits." {63}

While this process is clear in Mercantile capitalism (like ancient trade), it takes a new form in industrial capitalism, that rests on the productive capacity of labor.

So what of the REST of Capital/ Marx's theory of economics? -Marx next leaps to the embodiment of labour-power and exchange value in money. Money thus becomes the 'thing in common' that two otherwise different items share.

{the next section comes variously from Wage Labor and Capital and a section of Capital that you did not read}
Wages
Wages are the price paid for labor. But how much? Remember that Marx is dealing with a perfect economy, and that labour is simply one of many commodities, and that the VALUE, the PRICE of a commodity is simply the value of the labour required to produce it. This applies as much to watches as to workers. Thus, people are PAID only what they are required to LIVE off of.

[this isn't exactly right, they are paid the cost of producing a laborer like themselves, thus Marx can handle having highly paid well trained people, because the cost of 'producing' that commodity -- i.e. a highly skilled worker -- is figured into value.]

So what does the system look like thus far? On the one hand we have values of goods equal to the amount of labor that it takes to make the goods, and in a perfect economy everyone pays exactly what the stuff is worth.

• 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)

If All of this is true, where do profits come from?
The problem is that if everything is traded for the cost that it takes to produce it, then where would we ever get profit? The answer Marx gives, is 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.

"The change of value that occurs in the case of none intended to be converted into capital, cannot take place in the money itself ... the change originates in the use-value, as such, of the commodity.  In order to be able to extract value from the consumption of a commodity, or rent, Moneybags, must be so lucky as to find, .. a commodity whose use-value possesses the peculiar property of being a source of value." {336}  This is what people do through creative labor.

Thus profit is the stolen surplus value of the laborer.

The Division of Labor and Manufacture
Here KM talks about the division of labor, how it came to be. Points out two ways:  The bringing together of different tasks (the carriage example) and the simplification of multiple tasks.  IN both cases, size matters: having many people producing makes it possible to produce more efficiently through the DOL

The Capitalistic Character of Manufacture
Note that part of what KM is doing here is explaining how M - M`.  Part of this rest on the expansive capacity of the D.O.L, which he states as:

    "Hence, it is a law, based on the very nature of manufacture, that the minimum amount of capital, which is bound to be thin the hands of each capitalist, must keep increasing; in other words, that the transformation into capital of the social means of production and subsistence must keep expanding." {p.68}

"What is lost by the detail laborer, is concentrated in the capital that employs them. It is a result of the division of labour in manufactures, that the laborer is brought face to face with the intellectual potencies of the material process of production, as the property of another, and as a ruling power.  This separation begins in simple cooperation...  It is developed in manufacture which cuts down the laborer into detail laborer.  It is completed in modern industry, which makes science a productive force distinct rom labour and presses it to the service of capital." {p69}

The So-Called Primitive Accumulation
{I draw heavily on Michael Perelman's work in this discussion:"

Note that "Primitive" seems to be a miss-translation.   Marx translated Smith's word, "previous," as "ursprunglich" (Marx and Engels 1973; 33: 741), which Marx's English translators, in turn, rendered as "primitive."

Marx starts this piece by pointing out the circular problem:

We have seen how money is changed into capital; how through capital surplus-value is made, and from surplus-value more capital. But the accumulation of capital pre-supposes surplus-value; surplus-value pre-supposes capitalistic production; capitalistic production presupposes the pre-existence of considerable masses of capital and of labor-power in the hands of producers of commodities. The whole movement, therefore, seems to turn in a vicious circle, out of which we can only get by supposing a primitive accumulation (previous accumulation of Adam Smith) preceding  capitalistic accumulation; an accumulation not the result of the capitalistic mode of production, but its starting point." {p.70}

Marx rejected Smith's otherworldly conception of previous accumulation. He chided Smith for attempting to explain the present existence of class by reference to a mythical past, which lies beyond our ability to challenge it. Marx insisted, "Primitive accumulation plays approximately the same role in political economy as original sin does in theology" (Marx 1977, p. 873). Marx's analogy between original sin and original accumulation is apt. Both original sin and original accumulation turn our attention away from the present to a mythical past, which supposedly explains the misfortunes that people suffer today.

In the next section we read (Historical Tendency of Capitalist Accumulation), Marx lays out the history of this process, starting w. petty industry and building to the type of industrial capital we have now.  The key is free labor, labor that (a) does not have the means to support itself and (b) is not tied to the land/dominion, but sells itself as a commodity.  In this process, we get to a system where the capitalist exploits many workers, but that the system turns on itself.

    "That which is now to be expropriated is no longer the laborer working for himself, but the capitalist exploiting many laborers.  This expropriation is accomplished by the action of the immanent case of capitalistic production itself, by the centralization of capital.  One capitalist always kills many.  Hand in hand w. this centralization ior this expropriationof many capitalist by few, devel, on an ever-extending scale, the co-operative form of the labor process, the conscious technical application of science..."

 
"With this too grows the revolt of the working class, a class always increasing in numbers, and disciplined, united, organized by the very mechanism of the process of capitalist production itself. [leading to a crisis] ... Centralization of the means of production and socialization of labour at last reach a point where they become incompatible with their capitalist integument.  Thus integument is burst asunder.  The knell of capitalist private property sounds.  The expropriators are expropriated."

Note the Hegelian logic of the 2nd to last paragraph:
 

    "[Capitalist private property] is the first negation of individual private property, ... but capitalist production begets, w. the inexorability of a Law of Nature, its own negation.  It is the negation of negation.  This does not re-establish private property for the producer, but gives him individual property based on the acquisitions of the capitalist era: i.e. on co-operation and the possession in common of the land and the means of production." {74}

The general law of capitalist systems is competition. In what way?

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. 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?
• Labor-saving devices: The introduction of machines. When labor costs more than the profit gained, substitute a machine. This lowers employment and again makes labor cheap. BUT in a Marxist world, you can't buy a machine for less than it is 'worth'. It is only from the LIVING power of a worker that you can realize profit
• [does this seem right? shouldn't the cost of a machine be equal to the cost it took to produce it? i.e. just like that for labor?]

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.

Note that the PREDICTIONS of this model with respect to real WAGES, Firm Concentration Ratios, Unemployment, etc. seem to fit fairly well.

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

Classes

There are 3 main classes in modern society:

1. Wage laborers - have labor power to sell
2. Capitalists - own capital
3. Land owners - extract rent