Marx and Economix

Marx saw the aim of the working-class party as the preparation for and organisation of revolution – the overthrow of the ruling class of capitalist – and the organisation of a new system of production, socialism. A working-class party explains why, so long as capitalist production, continues, the struggle between classes must also go on, while economic crises and wars inflict terrible sufferings on the workers; but that the conflict and sufferings can be ended by changing the system of production, which involves the overthrow of the capitalist class.

Capitalism evolved out of feudal times. The typical feudal form of production was production for local consumption: food, clothing and other articles were produced by the serfs for themselves and for their feudal lords. Any surplus was sold in exchange for articles brought in from other countries or from other parts of the country. But the main part of production was still for consumption by the producers and the lord who had feudal rights over it.

When the feudalism began to break up that this form of production gradually gave way to production for profit, which is the essential mark of capitalism. Production for profit required two things: someone with enough resources to buy means of production (looms, spinning-machines and so on); and, secondly, people who had no means of production themselves, no resources by using which they could live. In other words, there had to be “capitalists,” who owned means of production, and workers whose only chance of getting a livelihood was to work the machines owned by the capitalists.

The workers produced things, not directly for themselves or for the personal use of their new “lord,” the capitalist, but for the capitalist to sell for money. Things made in this way are called “commodities” – that is, articles produced for sale on the market. The worker received wages, the employer received profit – something that was left after the consumer had paid for the articles, and after the capitalist had paid wages, the cost of raw materials and other costs of production.

What was the source of this profit? Marx pointed out that it could not possibly come from the capitalists selling the products above their value – this would mean that all capitalists were all the time cheating each other, and where one made a “profit” of this kind the other necessarily made a loss, and the profits and losses would cancel each other out, leaving no general profit. It therefore followed that the value of an article on the market must already contain the profit: the profit must arise in the course of production, and not in the sale of the product.

There has to be some factor in production which adds value greater than its cost (its own value). What is meant by “value.” In ordinary language, value can have two quite distinct meanings. It may mean value for use by someone – a thirsty man “values” a drink or a particular item may have a special  “sentimental value” for someone. But there is also another meaning in ordinary use – the value of a thing when sold on the market, by any seller to any buyer, which is what is known as its “exchange value.” What gives products their normal “exchange value” on the market? Why, for example, has a yard of cloth more exchange value than a pin?

Exchange value is measured in terms of money; an article is “worth” a certain amount of money. But what makes it possible for things to be compared with each other in value, whether through money or for direct exchange? Marx pointed out that things can only be compared in this way if there is something common to all of them, of which some have more and some less, so that a comparison is possible. This common factor is obviously not weight or colour or any other physical property; nor is it “use value” for human life (necessary foods have far less exchange value than motor cars) or any other abstraction. There is only one factor common to all products – they are produced by human labour. A thing has greater exchange value if more human labour has been put into its production; exchange value is determined by the “labour-time” spent on each article.

But, of course, not the individual labour-time. When things are bought and sold on a general market, their exchange value as individual products is averaged out, and the exchange value of any particular yard of cloth of a certain weight and quality is determined by the “average socially necessary labour-time” required for its production.

If this is the general basis for the exchange value of things produced under capitalism, what determines the amount of wages paid to the actual producer, the worker? Marx put the question in precisely the same way: what is the. common factor between things produced under capitalism and labour-power under capitalism, which we know also has an exchange value on the market? There is no such factor other than the factor which we have already seen determines the exchange value of ordinary products – the labour-time spent in producing them. What is meant by the labour-time spent in producing labour-power? It is the time (the average “socially necessary” time) spent in producing the food, shelter, warmth and other things which keep the worker from week to week. In normal capitalist society, the things necessary to maintain the family of the worker have also to be taken into account. The labour-time necessary for producing all these things determines the exchange value of the worker’s labour-power, which he sells to the capitalist for wages.

But while, in modern capitalist society, the time spent in maintaining the worker’s labour-power may be only four hours a day, his power to labour lasts eight, ten or more hours a day. For the first four hours each day, therefore, his actual labour is producing the equivalent of what is paid to him in wages; for the remaining hours of his working day he is producing “surplus value” which his employer appropriates. This is the source of capitalist profit – the value produced by the worker over and above the value of his own keep – that is, the wages he receives.

The term “exchange value” has been used, because this is the basis of the whole analysis. But in actual life things hardly ever sell at precisely their exchange value. Whether material products or human labour power, they are bought and sold on the market at a price, which may be either above or below the correct exchange value. There may be a surplus of the particular product on the market, and the price that day may be far below the correct exchange value; or, if there is a shortage, the price may rise above the value. These fluctuations in price are, in fact, influenced by “supply and demand,” and this led many capitalist economists to think that supply and demand was the sole factor in price. But it is clear that supply and demand only cause fluctuations about a definite level. What that level is, whether it is one penny or a hundred pounds, is clearly not determined by supply and demand, but by the labour-time used in producing the article.

The actual price of labour-power – the actual wages paid – is also influenced by supply and demand; but it is influenced by other factors as well – the strength of trade union organisation in particular. Nevertheless, the price of labour-power in ordinary capitalist society always fluctuates around a definite level – the equivalent of the worker’s keep, taking into account that the various grades and groups of workers have varying needs, which are themselves largely the result of previous trade union struggles establishing a standard above the lowest minimum standard for existence. The labour-power of different grades of workers is not, of course, identical in value; an hour’s work of a skilled engineer produces more value than an hour’s work of an unskilled labourer. Marx showed that such differences were in fact accounted for when articles were sold on the market, which, as he put it, recorded a definite relation between what the more skilled worker made in an hour and what the labourer made in an hour.

How does this difference in value come about? Marx answers: not on any “principle” that skill is ethically better than lack of skill or any other abstract notion. The fact that a skilled worker’s labour-power has more exchange value than the labourer’s is due to exactly the same factor that makes a steamship more valuable than a rowing-boat – more human labour has gone to the making of it. The whole process of training the skilled worker, besides the higher standard of living which is essential for the maintenance of his skill, involves more labour-time.

Another point to note is that if the intensity of labour is increased beyond what was the previous average, this is equivalent to a longer labour-time; eight hours of intensified labour may produce values equivalent to ten or twelve hours of what was previously normal labour.

What is the importance of the analysis made by Marx to show the source of profit? It is that it explains the class struggle of the capitalist period. In each factory or other enterprise the wages paid to the workers are not the equivalent of the full value they produce, but only equal to about half this value, or even less. The rest of the value produced by the worker during his working day (i.e. after he has produced the equivalent of his wages) is taken outright by his employer. The employer is therefore constantly trying to increase the amount taken from the worker. He can do this in several ways: for example, by reducing the worker’s wages; this means that the worker works a less proportion of the day for himself, and a greater proportion for the employer. The same result is achieved by “speeding up” or intensifying the labour – the worker produces his keep in a smaller proportion of the working day, and works a larger proportion for his employer. The same result, again, is achieved by lengthening the working day, which increases the proportion of the working day spent in working for the employer. On the other hand, the worker fights to improve his own position by demanding higher wages and shorter hours and by resisting “speeding up.” Hence the continuous struggle between the capitalists and the workers, which can never end so long as the capitalist system of production lasts.

 Also to be noted is that the “surplus value” created by the worker in the course of production is not all kept by his employer. It is, so to speak, a fund from which different capitalist groups take their pickings – the landowner takes rent, the banker takes interest, the middleman takes his “merchant’s profit,” and the actual industrial employer only gets what is left as his own profit. This in no way affects the preceding analysis; it only means that all these capitalist sections are, as it were, carrying on a certain subsidiary struggle among themselves for the division of the spoils. But they are all united in wanting to get the utmost possible out of the working class.

Then there is another most important factor in the development of capitalism – competition. Like all other factors in capitalist production, it has two contradictory results. On the one hand, because of competition to win larger sales of products, each capitalist enterprise is constantly trying to reduce production costs, especially by saving wages – through direct wage reductions or by speeding-up or other forms of rationalisation. On the other hand, those enterprises which succeed in getting enough capital to improve their technique and produce with less labour are thereby contributing to the general process described above – the reduction of demand owing to the total wages paid out being reduced.

Nevertheless, the enterprise which improves its technique makes a higher rate of profit for a time – until its competitors follow suit and also produce with less labour. But not all its competitors can follow suit. As the average concern gets larger and larger, greater amounts of capital are needed to modernise a plant, and the number of companies that can keep up the pace grows smaller. The other concerns on to the wall – they become bankrupt and are either taken over by their bigger competitors or are closed down altogether. “One capitalist kills many.” Thus in each branch of industry the number of separate concerns is steadily reduced: big corporations appear, which more or less dominate a particular field of industry. Thus out of capitalist competition comes its opposite – capitalist monopoly.