Much of the left today have abandoned Marx. Many people who are against certain aspects of capitalism snatch pieces of Marx to give themselves a progressive legitimacy but being anti-capitalist does not really say much. It only begs the questions: how do we describe capitalism and from what angle are we criticizing it? Much of the Left chooses to divide capitalism between good and bad ones. They replaced Marx's criticism of capitalism with a host of reformist and even reactionary demands peddled under this name. Academics have tried to convert it into a scientific sociology or an alternative economic science for the left wing of the bourgeoisie. Pseudo-socialist presented workers with repulsive examples of despotic societies in the name of socialism, like the Soviet Union, China and Albania. The result is to alienate workers from communism and cut the connection between worker and communism.
Terminology is important to discussion and bandying words around without fully comprehending their meanings won’t be fruitful. Capitalism is defined in many ways. Each of these definitions of capital leads to a specific political conclusion.
The term capitalism has been increasingly replaced by the more clever-sounding “free enterprise” or "free markets". One definition of capitalism is based on private property. This definition equates capitalism with private ownership and is also defined in terms of market economy and competition. That is a mistake. Those who define capitalism as private property ownership think that to abolish capitalism, state ownership must replace private property. Some others think that we can do away with capitalism if we abolish market and institute a central planning system. Capitalism can just as be run by the government through state-owned companies as privately-owned enterprises. Defining capitalism by market and private property ownership is a misleading characterization of Marx's criticism of capitalism that led to the failure of the revolution in Russia. Nowhere does Marx says private property ownership is an essential characteristic of capitalist exploitation. What he says is that capitalist exploitation requires that productive labourer to be separated from the means of production and it is irrelevant whether the state owns the means of production or a person or a group of people.
Many others take disparity in income level as way of defining a capitalist society and unequal political power can be also taken as a criterion to defining capitalism and so those who define capitalism as unequal income level seek redistribution of wealth via taxation reform. The reason “people’s capitalism” fails to make capitalism work for the people is that this is an impossible mission. Capitalism just cannot be made to work in the interest of all. It is a profit-making system that can only work as such, in the interest of those who live off profits.
The driving force of capitalism is the accumulation of capital out of profits. When this slows down, as at present, there is a crisis. So, governments must not do anything that might discourage the making of profits to accumulate as capital; in fact, even if it wasn’t their original intention they have to end up doing all they can to encourage this. Inevitably, this brings them into conflict with the wage and salary working class whose labour is the source of profits, imposing wage restraint and/or austerity on them. All governments have to put profits before people because capitalism, the system within which they have to work, runs on them.
Capitalism is the social system under which we live. Capitalism is primarily an economic system of competitive capital accumulation out of the surplus value produced by wage labour. As a system it must continually accumulate or go into crisis. Consequently, human needs and the needs of our natural environment take second place to this imperative. Capitalist investors want to end up with more money than they started out with, but why? Is it just to live in luxury? That would suggest that they aim of capitalist production was simply to produce luxuries for the rich.
Capitalism is an ever-expanding economy of capital accumulation. In other words, most of the profits are capitalised, i.e. reinvested in production, so that production, the stock of means of production, and the amount of capital, all tend to increase over time ( in fits and starts). The economic circuit is thus money - commodities - more money - more commodities, even more money. This is not the conscious choice of the owners of the means of production. It is something that is imposed on them as a condition for not losing their original investment. Competition with other capitalists forces them to re-invest as much of their profits as they can afford to in keeping their means and methods of production up to date. As a result there is continuous technological innovation. Defenders of capitalism see this as one of its merits and in the past it was insofar as this has led to the creation of the basis for a non-capitalist society in which the technologically-developed means of production can be now—and could have been any time in the last 100 years—consciously used to satisfy people’s wants and needs. Under capitalism this whole process of capital accumulation and technical innovation is a disorganised, impersonal process which causes all sorts of problems—particularly on a worldscale where it is leading to the destruction of the environment.
Wage Slavery
Workers sell their labour power to the capitalist for a wage. As a commodity, labour power has an exchange value and a use value, like all other commodities. Its exchange value is equal to the sum total of the exchange values of all those commodities necessary to produce and reproduce the labour power of the worker and his or her family. The use value of labour power is its value creating capacity which capitalist enterprises buy and put to work as labour. However, labour power is unlike other commodities in that it creates value. During a given period it can produce more than is needed to maintain the worker during the same period. The surplus value produced is the difference between the exchange value of labour power and the use value of the labour extracted by the capitalists. In capitalism, however,the wage-worker is a “free” agent. No master holds him as a chattel, nor feudal lord as serf. This modern worker is free and independent: he has choices. He can dispose of his services to this or that capitalist owner, or he can withhold them. But this freedom is ephemeral. He must sell his working ability to some one or other employer or face starvation. In a capitalist society workers have the option of finding a job or facing abject poverty and/or starvation. Little wonder, then, that people “voluntarily” sell their labour and “consent” to authoritarian structures! They have little option to do otherwise. So, within the labour market workers can and do seek out the best working conditions possible, but that does not mean that the final contract agreed is “freely” accepted and not due to the force of circumstances, that both parties have equal bargaining power when drawing up the contract or that the freedom of both parties is ensured. His slavery is cloaked under the guise of wage-labour.
When the worker has found an employer he receives in return for his labour a price known as wages which represents on the average what is necessary for his sustenance so that he can reproduce the energy to go on working, and also produce progeny to replace him when his working days are over. During the working-day the worker produces wealth equivalent to that for which he is paid wages, but this does not require all the time of the working day. In providing for his own keep he has also produced a surplus and this surplus belongs to the employer. This may eventually be split into profit to the manufacturer, rent to the landlord, and interest on capital invested by a financier. As capitalism develops the time in which the worker produces his own keep decreases while the surplus accruing to the capitalist increases. During this development the productivity of labor increases at an accelerating tempo: The worker continually produces more with less.
So when a man sells his labour power a number of hours for a certain wage, the amount of necessaries to produce his wages is always smaller than the amount of labour which the employer receives from him, the difference between what the worker receives as wages and what his labour power produces during his working time, constitutes the sole source of unearned income, i.e., capitalist profits. So profits exist because the worker sells themselves to the capitalist, who then owns their activity and, therefore, tries to control them like a machine.
Wage levels will vary with “the respective power of the combatants” as Marx puts it and in the long run this will determine the value of labour-power and the necessaries of life. From the point of view of wage-labour , wage levels and the value of labour-power depends on the balance of class forces, on what workers can actually get from their employers. As wages are also regulated by the relation of supply and demand, a surplus of labour power (the unemployed) is necessary to prevent wages swallowing up all profit. Therefore the unemployed army is a vital necessity to capitalist production, and there can be no solution under capitalism.
It would be wrong to confuse exploitation with low wages. It does not matter if real wages do go up or not. The absolute level of those wages is irrelevant to the creation and appropriation of value and surplus-value. Labour is exploited because labour produces the whole of the value created in any process of production but gets only part of it back. On average workers sell their labour-power at a “fair” market price and still exploitation occurs. As sellers of a commodity (labour-power) they do not receive its full worth i.e. what they actually produce. Nor do they have a say in how the surplus value produced by their labour gets used.
Capitalism is a market economy, but not a simple market economy. A key difference of course is that under capitalism production is not carried out by self-employed producers but wage and salary workers employed by business enterprises. In other words, by profits we mean income that flows to the owner of a workplace or land who hires others to do the work. In other words, under capitalism, the producers have become separated from the means of production. This makes all the difference.
Marx explained the difference when he said that what happens in a simple market economy is that the producers brought to market a product of a certain value which they sell for money in order to buy another product or products of equal value. The economic circuit is commodity-money-commodity (C-M-C), the aim being to end up with a basket of useful things. Under capitalism the economic circuit is different. A capitalist sets out with a sum of money which they use to buy commodities (factory buildings, raw materials, working skills) that can be used to produce other commodities with the aim of ending up, after these other commodities have been sold, with more money than they started off with. So the circuit is now money-commodities-more money (M-C-M+).
But the picture of capitalism is still not complete.
Capitalist investors want to end up with more money than they started out with, but why? Is it just to live in luxury and consume? It is possible to envisage such an economy on paper. Marx did, and called it “simple reproduction”, but only as a stage in the development of his argument. By “simple reproduction” he meant that the stock of means of production was simply reproduced from year to year at its previously existing level; all of the profits (all of M+ less M) would be used to maintain a privileged, exploiting class in luxury . As a result the M in M-C-M+ would always remain the same and the circuit keep on repeating itself unchanged. This of course is not how capitalism operates. Profits are capitalised, i.e. reinvested in production, so that production, the stock of means of production, and the amount of capital, all tend to increase over time . The economic circuit is thus money-commodities-more money-more commodities, even more money (M-C-M+-C+-M++). In order to make more money, money must be transformed into capital.
This is not the conscious choice of the capitalists. It is something that is imposed on them as a condition for not losing their original investment. Competition with other capitalists forces them to reinvest as much of their profits as they can afford to in keeping their means and methods of production up to date. They cannot act contrary to the inner nature of capitalism which requires the constant accumulation of capital and the opening of new markets throughout the world. And it cannot avoid that increasing productivity of labor which means more production for less expenditure of labour.
The worker goes into the labour market as an article of merchandise, and his wages, that is, his price, is determined like that of any other article of merchandise, by the cost of production (i.e. the social labour necessary), and this in the case of the worker is represented by the cost of subsistence. The price of labour power fluctuates by the operation of supply and demand. There are generally more workers in the market than are actually required by the employers, and this fact serves to keep wages from rising for any length of time above the cost of subsistence. Moreover, machinery and scientific applications are ever tending to render labourers superfluous, with a consequent overstocking of the labour market, decrease of wages, and an increase in the number of the unemployed. Under these conditions relative poverty is necessarily the lot of the working-class.
We have the worker entirely dispossessed of the means of getting a living except by selling himself as an article of merchandise to the owners of the means of living. This is wage-slavery. While capitalists are as a class against the workers as regards the ownership of the wealth produced by the working-class, they, the capitalists, are also antagonistic to one another in the endeavour to get the larger share of the markets. It wasn’t just Marx but also Fourier who pointed long ago that this competition could only end in monopoly, and we do see concentration going on in every branch of industry.
Profits
Profit at its most basic is the difference between the money a business obtains from the sale of its products and the money it has to spend on producing them.
One of Marx’s crucial discoveries in the field of political economy was that the working class of wage and salary earners gets paid less than the value of the goods it creates, the difference being a surplus value which accrues to the owning class in the form of ground rent, interest and profit. Capitalism turned human labour power into a commodity – something bought and sold. When capitalists buy a worker’s labour they buy the worker’s capacity to work for a full day. Wages are set, however, like every other commodity, by the value of labour-power needed to reproduce them, which in the case of labour is the value of food, clothing, etc. needed to keep the worker in a fit condition to work. But the value of ‘labour power’ is different from the value created by the worker’s labour and this difference, called surplus value, belongs to the capitalist. The working day under capitalism therefore divides into two parts; ‘necessary labour’ when the workers actually earns what they are paid in wages, and ‘surplus labour’ which is the time spent producing ‘surplus value’ for the capitalist employer. The aim of capitalist production is the production of surplus value.The new value added by labour in the process of production to the previously existing value of the raw and other materials is divided into wages and surplus value, which goes to the capitalist employer and is the source of profit. Profits are made in the sphere of production but only “realised” in the market. What is so vital about profit that makes this necessary? It is the source of the capitalist’s capital. The more capital they can accumulate out of the profits accruing to them the more effectively can they compete–by investing in more productive technologies to undercut their competitors–and thus claim a larger share of the market for themselves. If they did not do this then their competitors would, and could knock them out of business. Economic competition between enterprises fuels the drive towards capital accumulation. This in turn necessitates profit maximisation which expresses itself as a continuous downward pressure on wages (reinforced by competition between workers on the labour market.)
We’re the ones who build things, make things, provide services, make things work, provide the ideas. But though we build the world around us, it does not belong to us. Everything that has been built around us is the result of our work and yet we don’t work for ourselves. We produce not for ourselves, but at the behest’s and whims of others. The worker is compelled to labour for the purpose of producing something to satisfy the wants of others who, holding the things necessary for his life, thereby control him. He is, therefore, still a slave.We are the ones who are told what to produce, how to produce it, how much, and how fast.We are the ones who receive a paycheque, be it high or low, not for selling what we produce but for selling our power to work. With that paycheque we try to buy back what we make. The source of someone else’s profits comes from our work.
Summary
Marx’s theory of surplus value is the cornerstone of his analysis of capital. For him, class means the production of surplus value by the worker and its appropriation by the industrial capitalist. When Marx talks about exploitation, this is what he has in mind. When Marx talks about class exploitation, he has in mind the extraction of surplus-labour from direct labourer by the capitalist enterprise. This surplus is the unpaid labour of the labourer that the capitalist lines up in his/her pocket. Marx's entry point to analyse capitalism was neither private ownership nor market but rather exploitation of labour power and appropriation of surplus value by industrial capitalists.
Capitalist exploitation does not occurs in the market. Buying and selling of labour power is a "fair and equal exchange." Buying and selling of other commodities produces no surplus value. Whether means of production is owned privately or owned by the state is irrelevant to capitalist production. Capitalist production is production of surplus value and its appropriation by people other than the productive worker.
Marx’s theory of surplus value identifies non surplus-value producing capitalists, for example, merchants and money lending capitalists (the bankers) and where they stand in regards to the production and appropriation of surplus value. To expand his/her production, the capitalist may have to borrow money from money lender who in return gets a portion of the surplus-value in the form of interest. Moreover, the industrial capitalist can sell his/her products to a merchant to speed up the capital turnover. The merchant, in return, receives a part of the surplus value in the form of a discount, and the capitalist enterprise can concentrate on the production of surplus value rather than being involved in commodity exchange process. Another part of the surplus-value goes to the state in the form of tax to secure the necessary stability and protection for capital, and so on.
While the capitalists whose capital is directly engaged in the production of surplus-value, the industrialist, is engaged in the production of surplus value, the merchant performs the transformation of commodity into money. In other words, merchants do not produce surplus-value, for buying and selling a commodity simply represents the exchange of value between two equals. However, merchants make the realisation of surplus value possible because they turn products of labor into capital. Similarly the money lender does not produce any surplus value, but he/she may lend his money to the industrial capitalist who may lay it out for the expansion of production and creation of more surplus-value. In other words, the financiers transfer their money to capitalist enterprise only temporarily. By putting their money at the disposal of industrial capitalist, money lender provide the condition of existence of production and appropriation of surplus-value. Therefore, merchants and money lenders neither are the appropriators of surplus value nor its distributor. They are recipients of portions of the surplus value in the forms of discount and interests, respectively. Therefore, neither buying and selling, whether in domestic or international markets, nor lending or borrowing money, creates surplus value. Speculation is the use of money-capital, not to invest in the production of new wealth and new surplus value, but unproductively to try and swindle other capitalists’ out of their past profits. It’s a zero-sum game in which the total amount of profits remains the same but merely gets redistributed differently amongst capitalists depending on their speculative skills.
Marx uses his theory of surplus value as a principle tool in locating various segments and groups of people in the capitalist society and where they stand in relation to production and appropriation of surplus value.
What is socialism?
Marx defined socialism as the abolition of wage slavery and the creation of a society based on common ownership. Socialism is humankind's liberation from all forms of deprivation and bondage.
There is a need to express the socialist vision in more concrete terms where more practical models of economic and political organization in socialist society be elaborated. Many socialists say it is not for us to devise blueprints and utopias, that our task is to organize a revolution against the existing system, to make our goals clear but it is the process of workers' revolution itself which will provide the practical forms of their realization. Nevertheless, to some degree, we must offer positive alternatives. Socialists should, firstly, communicate the precise meaning of socialist aims, and, secondly, to show the feasibility of their realisation. It must explain that the abolition of bourgeois ownership does not mean introduction of state ownership, and show how the organisation of people's collective control over means of production is practical. It must stress that socialism is an economic system without money and wage labour, and then shown how organising production without labour power as a commodity is possible. Our job is not to make models and utopias and prepare a detailed blueprint of production and administration in a socialist society but to show in what ways socialist society differs from the existing one. For example, we show the process of the withering away of the state following a socialist revolution by explaining the material basis of the state in class society and its superfluousness as a political institution in a classless society, and not by producing a step-by-step guide programme for the dismantling of state institutions and its departments.
Many political activists shrug their shoulders at socialism and socialist organization, preferring participation in the host of one-issue struggles and while socialists should actively be involved also in these fields, this doesn't preclude theoretical work for communism. Capitalist society will assimilate protests and re- formulate them after its own image, incorporating them into the establishment. To resist this requires the existence of independent socialist parties. The issue of the primacy of theory over movement, or vice versa, has little meaning. They are the different levels of a single social movement. Socialism is a movement for working-class and communist revolution. We regard this revolution possible and on the agenda right now. But as a class which is under pressure, we also fight for every improvement in the social situation which enhances workers' political and economic power and promotes their human dignity. We also fight for every political opening which may facilitate the class struggle. We are activists of the worker's protest movement. We are fighting for the establishment of the worker's social and economic alternative as a class. The worker's position in production does not change. The economic foundation of society does not change. This class's alternative for the organization of human society does not change. The worker still has to sell his or her labour power daily in order to live, and thus views the world from the same standpoint and offers the same solution to it. Socialism is the worker's movement to destroy capitalism, abolish wage-labour and do away with exploitation and classes.
The last bricks of the Welfare State, even its foundation stones, are being dismantled and even the existing basic level of society's responsibility towards the individual, in terms of social welfare and economic security, is being challenged by employers and politicians. In many part of the world nationalism and religion are on the ascendance. Yet in other regions of the globe workers are gradually emerging out of their previous political apathy. The world is entering a turbulent period of intensified worker protest movements. Today the destructive results of the recession and government austerity policies for the workers - unemployment, loss of social services, etc. - are felt more than ever. In the whole of Europe questions such as unemployment and lack of job security and so on are becoming a focus for a renewed surge of workers' movement, and the ruling class is losing its capacity for the political intimidation of the workers' movement through its once tried and tested populist mobilisation of the "middle-class" strata. The decline of trade unionism, while having immediate detrimental effects on the life of millions of workers, has created an environment for new thinking and alternative practices in worker organisation in Europe. The workers' movement has already moved towards more radical actions organised outside the traditional union structure, creating alternative organisations, as witnessed by the recent Walmart protest wildcat strikes. The worker is realising that it is the worker and worker alone who should take care of his economic interests and political rights, without hoping for anything to come from the politicians who fill parliamentary seats or the bureaucrats in their professional union posts. The era of workers' strength on the political stage is once again arriving.
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