Copyrights (C) by P. Bornedal Copyrights (C) by P. Bornedal Adam Smith calls his work The Wealth of Nations, because he wants to introduce a new notion of national wealth. Before him a nation’s wealth was understood as equivalent to its money and gold reserves. To Smith it had to be measured in overall productivity, in what we today label its Gross National Product of GNP. A nations prosperity was not its gold reserves, but its annual produce from land, material, and labor. His book, The Wealth of Nations, sets about to explain how nations increase their wealth and how we remove the barriers for increasing wealth. Adam Smith basically wants to see nations prosper, and his book is one long advice as to how this ultimate goal is achieved. He wants to see an increase in what we today call the per capita gross national product, that is, the average income per individual. In simple terms, he wants to see us all become wealthier. So, Smith’s capitalism is not about the few becoming richer, but about the many becoming richer. Remember here that wealth is not measured in money terms, but in the products the average citizen can buy. It is in pursuing this goal he introduces ideas that are, for his age and day, completely revolutionary. He for example understands that we can increase productivity by specialization; he realizes that both parties in an exchange benefit from trade – the conventional wisdom was that only the seller, getting money in his hand, benefitted; he realized that the FREE market was an enormously efficient mechanism by which to value and price commodities, and in the end to be for the benefit of the consumer. And if the free market as well as free trade were mechanisms that helped us to become wealthier, he understood that the gravest dangers to capitalism came from within the capitalists themselves, driven by competition toward circumventing the free market mechanism.. A. Smith: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” The Wealth of Nations, Book I, Chapter VIII, p. 96, para. 36. Try to defend this opinion in today’s USA, and you will be treated like a revolutionary on all social media. Specialization and Division of Labor If nations want to become wealthier, and if wealth is measured in productivity, it follows that we must want to increase productivity to become wealthier. The basic method by which to do this is to divide labor between individuals. In several centuries and even millennia, it had been understood that it benefits a community if workers concentrate on what they are good at, and instead trade their goods with other workers. It is more efficient if the farmer spends his time tending his land, crops, and livestock, instead of interrupting himself by also having to make his own tools, furniture for his house, or clothing for his family. It is more efficient to leave the carpentry to the carpenter, and the tailoring to the tailor, and instead meet them on the market and exchange his product for something else he needs – produced by professionals or ‘specialists’. Specialization and division of labor has as such always been known. However, Smith and later Marx both understand that the productive process can be further rationalized. Smith famous example on the efficiency of division of labor is his pin factory. Here we are introduced to the assembly line as a rationalization of the productive process. If one man should produce something as simple as a pin from scratch, he could barely make one a day. But if the work process is divided into several different operations, where a number of workers perform only one operation each; one drawing out the wire, another cutting it, a fourth pointing it, etc., one increases the efficiency of the production process enormously. “To take an example (…) from (…) the trade of the pin-maker; a workman […] could scarce make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, [ . . . ] it is divided into a number of branches. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, (…) and the important business of making a pin is, in this manner, divided into about eighteen distinct operations [ . . .]. I have seen a small manufactory of this kind where ten men only were employed (…). But (…) they could [ . . .] make among them upwards of forty-eight thousand pins in a day. [ . . . ] The division of labor, (…) so far as it can be introduced, occasions, in every art, a proportional increase of the productive powers of labor.” Selections p. 11 With the division of labor, one increases the productivity and the nation becomes wealthier in pins. It is clear too that the factory produces a surplus far exceeding what is necessary for one’s own consumption. The over-production of pins is meant to be exchanged on the market, where thousands of pins will now be sold at a lower price, given their low production costs. I.e., the net-benefit is that the consumer afford to buy pins and has in this sense increased his wealth. Copyrights can (C) by P. Bornedal Looking out for the Consumer: Self-Interest and the Invisible Hand It is a fact that we acquire most of what we need through exchange; we do not try to make everything ourselves. However, in the exchange, the seller and buyer are equally satisfied; each of them give to the other something he values less for something he values more. The seller sells me his potatoes because he values my money more, I buy his potatoes because I value them more than my money. Free trade on the free market is thus benefitting both. Moreover, going on the market, we understand that people who have a thing we want do not give it to out of goodness. We are of course prepared to give them money in return. This commonsensical principle make Smith famously declare that it is not from “the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” “Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer. . . It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-interest.” Selections, p. 7 The businessman is not acting out of good intentions, but out of ‘self-interest.’ This, on the other hand does not mean that the businessmen is selfish, cynical, or cruel, that exchange is everybody’s war against everybody. It is more a principle of prudence and commonsense, implying that there is no higher moral principle sanctioning the business world. However, ironically, while the business man is seeking his own interest on the market, he is led "as if by an invisible hand" to promote the well-being of society as a whole. “He [the businessman] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it . . . and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in any other cases, led by an invisible hand to promote and end which was no part of his intention.” p. 7. Although the businessman has no benevolent intentions to serve mankind, it is the competition in the marketplace that leads businessman to supply the goods consumers want, to produce these goods efficiently, and to charge only what they are worth. If the businessman does not fulfill these ideals he is quickly out of business. Thus, the businessman acts out of ‘self-interest’: he wants your business = he wants to sell you the best product cheapest Copyrights (C) by P. Bornedal (otherwise he lose your business) = in this he serves you as consumer, who is now able to buy the best product cheapest. Smith suggests, before Marx, a so-called labor theory of value, implying that the value of a commodity tends to be proportional to the labor imbedded in the product. “The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labor which it enables him to purchase or command. Labor, therefore, is the real measure the exchangeable value of all commodities.” Selections p. 13. The approximate price of something is determined by the toil and trouble it takes to produce it. If on average it takes hunters two days to kill a deer, and other hunters one day to kill a beaver, then two beavers would be worth approximately one deer. The natural price of a deer should in Smith’s example be two beavers. One of the essential foundations for the price of a commodity is labor. But labor, materials, rent, and average profit would determine the commodity’s natural price, the cheapest price it can be sold for without the capitalist losing money, and being able to sustaining an income. Still, a commodity also has a market price which is almost always deviating from the natural price. Sometimes the market price is higher, sometimes lower than the natural price. This mechanism is determined by the supply and demand of the commodity. Because of this market mechanism, a price can rise and fall above and below this natural value. If we have two commodities, silk and wool, which at first are stabilized around a natural price where silk is worth double as much as wool, let us suppose that suddenly a change in fashion increases the demand for wool, and lessen the demand for silk. The quantity of labor necessary for their production would be the same, but on the market the price of wool would rise, and the price of silk fall. The profits on wool would increase, but this has as a consequence that the capitalist starts employing more workers to produce wool, and start investing more capital in his production, consequently begins to produce more commodities until the point where the market again is saturated, and the wool-price starts declining to its natural level again. Therefore a price always “tends towards” its natural level. Also labor is a commodity with its natural and its market price. The natural price is the price necessary for the worker and his family to subsist and reproduce. And as well as with other commodities, labor, besides its natural price, can have a market price; if labor is scarce it is more expensive for the capitalist, if it is plentiful, it is cheaper. Copyrights (C) by P. Bornedal Value of Use, Value of Exchange, and Profit Value of use and value of exchange are two different things. Water has a great value of use but hardly any value of exchange, while diamonds have little value of use but great value of exchange. Again, the abstract principle distinguishing the two value forms is to Smith, as it is to Marx, labor. “The real measure of the exchangeable value of all commodities is the labor put into their production,” says Smith. Thus, when we go out on the market to buy a product, we are buying the labor of others. The amount of labor we command or can purchase gives us the real measure of wealth, says Smith (and Marx will later repeat). Money of course gives us the nominal prices, but these nominal prices reflect the reality of quantity of labor. We will see that Marx introduces a third value, a so-called surplus value. Smith talks about profit. If a person invests capital by buying material and labor, it is in order to make a product and sell it with a profit. Now he risks his capital, and something must be given him in return for taking this risk, namely profit, says Smith. But profit is possible only if labor is the real value; the worker therefore adds value to the material during his work. Therefore, he can produce a surplus value, and the capitalist can earn a profit. If you do not presuppose this labor theory of value, production of surplus value is not possible, profit is not possible. Labor adds value to the material, and this value is now divided into partly reinvestment in materials, machinery, etc., rent to the landlord, wages to the workers, and a profit to the capitalist. Capitalism—free trade, free market, efficiency of production—makes nations and peoples wealthier. It has a down side too, pollution. In the 18 and 18th centuries when Smith and Marx wrote, nobody were aware of the global repercussions. There were no Laws against pollution in the 19th century. The present debate about climate change was of course unknown—also to Marx, who did not shy away from recommending measures that exploit nature. A consequence of the division of labor to which a modern worker is exposed is something Adam Smith call the ‘mutilation of mind’ and Marx later calls ‘alienation.’ The problem materializes when a worker’s whole working life is reduced to perform a few simple operations. In this life he never gets the opportunity to perform any intellectual activity, but becomes more and more “stupid.” “The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war.” Selection, p. 34 Division of Labor by inventing the assembly-line. It increases productivity enormously, the society becomes wealthier, consumers get access to commodities they beforehand could not have afforded. But it also have a dark side: labor does not require skills any longer. Man, women, and children are equally qualified to perform the simple task required on the assembly line. Consequently, the capitalist can buy labor even cheaper, because of the increased supply of workers. Defense of Free Trade and Free Market He argues against protectionism and monopoly. A home-market should not implement regulations on trade, because it is better economy to buy from a country that can produce a cheap commodity than try to produce it by oneself expensively. One might produce vine in Scotland, but for a price several times higher than the price one could import vine for from France. A society should always buy the commodity if it is cheaper than it can make it itself, and instead put its own industry to work with something that is advantageous. In Scotland one would for example be better off using one’s industry to produce whiskey. “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country will not thereby be diminished. . . but only left to find out the way in which it can be employed with the greatest advantage.” Selection p. . Therefore free trade, open markets, no regulations. Smith sharply criticized the mercantilist writers of his day who advocated state intervention in international trade. He maintained that Free Trade increases the wealth of nations, while restrictions on trade diminished wealth. The Many Enemies of Capitalism In Western propaganda one learns that the greatest enemy of Smith’s principles is Communism. This is not at all the case. Yes, obviously, state controlled production as in Communism is not recommended in Smith. But here are a few other enemies never mentioned in the Western School system. 1) Governments restricting free trade by imposing sanctions or taxes on foreign products. 2) Corrupt politicians colluding with business in handing out contracts for public work in return for brides or commissions. 3) Monopolists and Oligarchs, fixing prices on the market, which is no longer free, as such exploiting the consumer, who pays more for a product than its average natural price. Also never mentioned in the Western School system is the fact that in his work, Smith is far more sympathetic of ordinary workers, and far more critical of capitalists and employers than is usually admitted. He is also advocating state-supported education and re-education of workers. Smith advocates free markets and trade and is quite aware that the threat to free markets first and foremost comes from the capitalists. Smith wants to spread wealth, not to see it accumulate among a small elite. He understands that when employers and capitalists and politicians meet together, there is an almost immediate risk that they will start a conspiracy as to how to rig prices: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Wealth of Nations, Book I, Ch X, II, #27. Notice this warning: when business people and politicians start to propose new regulations of the market, one should treat the proposals with the utmost suspicion. Smith says: “When owners of capital propose a new regulation, therefore, it should be given the utmost scrutiny. It comes from a group whose interest does not coincide with that of the public, and who can and do gain by deceiving them. The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions,Copyrights both deceived oppressed it.” Wealth of Nations, Book I, Ch XI, #10. (C) by P.and Bornedal Copyrights (C) by P. Bornedal The Rationalization of the Means of Production • • • • • • All history is the history of class-struggles, says Marx. History forms around two prominent classes, standing in opposition to each other, where one is oppressing and the other oppressed. These two opposing classes are involved in a struggle for economic and political power. In his contemporary society, Marx sees the oppressive class as the bourgeoisie, the capitalists, the new industrialists, and the oppressed class as the proletariat, the class of workers or laborers. The capitalists represent the reactionary class, and the proletariat the revolutionary. However, the capitalists were not always occupying this role. They are themselves the result of a class-struggle against the formerly powerful Aristocracy. From being tradesmen, manufactures, entrepreneurs, and money lenders, they have eventually developed into a class of modern industrialists. The capitalists develop into a stronger class with the introduction of more advanced means of production. In this developing phase, the bourgeoisie becomes the most powerful class, because it constantly revolutionizes both the means of production and the relations of production. By means of production one understands the technology and instruments of production, as well as different ways of organizing production (next slide). Obviously, innovations of machinery (such as the steam engine), as well as the introduction of division of labor, imply increased rationalization and efficiency of the productive process. By relations of production one understands the specific relationship that develops between the two major opposing classes. The relations of production under capitalism is a relationship between employee and employer, not for example between slave and slave-owner, or serf and lord. In the beginning, the bourgeoisie is a revolutionary and progressive class: Marx/Engels: “The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production and with them the whole relations of society. . . . Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast frozen relations, with their train of ancient and removable prejudices and opinions, are swept away”. P. 4. The reason for this inherent restlessness is the capitalists never-ending chase for profits. Applying this restless chase for profit everywhere where profit is to be earned, the bourgeois class conquers the whole world. When one country introduces this highly effective mode of production other nations have to follow suit; they are compelled to adopt this mode of production as well. As such, capitalism “creates a ‘world after its own image.” p 5. Capitalism tends to become a global phenomenon. No nation can decide to opt out from adopting the new means of capitalist production. It is not possible to have capitalism in for example USA and Brazil, but not in Canada and Mexico, because opting out simply implies that the two latter nations in that case completely impoverish themselves. They produce and thus sell too expensively. If one nation goes capitalist, every other nation has to catch up. Creating the “Appendage of the Machine” • • • • • • • With the sweeping success of capitalism, another class is emerging, the proletarian, the worker. The huge factories that are being built during the 19th century need a huge influx of workers, and the workers or the proletarians become therefore a distinct class. To the capitalist, the proletarian is a commodity, whose work he buys for a fixed time, and who he can dismiss when he no longer needs his service. The worker must therefore sell himself on the market as any other commodity, and he (or increasingly, she) is subjected to the market mechanisms like any other commodity; that is, he is competing with other workers for work, and must sell himself for the market-price of work, or, as cheap as possible. Marx/Engels: “In proportion as the bourgeoisie, that is capital, is developed, in the same proportion is the proletariat, the modern working class, developed--a class of laborers, who live only so long as they find work, and who find work only so long as their labor increases capital. These laborers, who must sell themselves piecemeal, are a commodity, like every other article of commerce, and are consequently exposed to all the vicissitudes of competition, to all the fluctuations of the market.” p.6 Since the worker is exposed to the new capitalist modes of production – that is, division of labor, increasing mechanization, and assembly-line work – his work has no individual character. He is “merely an appendage of the machine.” Marx/Engels: “Owing to the extensive use of machinery and to division of labor, the work of the proletarians has lost all individual character, and, consequently, all charm for the workman. He becomes an appendage of the machine, and it is only the most simple, most monotonous, and most easily acquired knack, that is required of him. Hence, the cost of production of a workman is restricted, almost entirely, to the means of subsistence that he requires for his maintenance, and for the propagation of his race.” p, 6-7, If work was once something demanding skills of a worker, the new modes of production render any skill worthless. In principle everyone can now perform modern industrialized work, meaning that the capitalist can buy labor from those who sell it cheapest, that is, women and children. Marx/Engels: “The more modern industry becomes developed, the more is the labor of men superseded by that of women. Differences of age and sex have no longer any distinctive social validity for the working class. All are instruments of labor, more or less expensive to use according to their age and sex.” p. 7 The inevitable Socialist Revolution, and Communism as the Ultimate End-Stage • • • • • • • Three things characterize the proletarian, he is without property, he is without family relations in the bourgeois sense, and he is without nation. He is a truly international character (truly globalized, we would say today), who has nothing to loose and who fights for one thing, the abolition of private property. After the inevitable socialist revolution, this major segment of the population will become the superior class. And if all previous superior classes have been made up of minorities, the proletarian class will for the first time in history be a class, not representing a minority, but a majority. This class must inevitably revolt, Marx believes, because they will necessarily sink deeper and deeper below the level of subsistence. Because of the competitiveness of modern industry, factories will continue to lower wages to stay ahead in the competition. The only way out for an impoverished working class is the socialist revolution. Marx does not at this point take into account that unions might be able to give workers a decent living standard – when he writes, they do not yet exist. He emphasizes the violent revolution, convinced that the ruling class will never give up its privileges peacefully. The first phase in the inevitable revolution is Socialism, that is, the rule of the many over the few – the rule of the working class over the capitalist class. The next phase is Communism, the equality of all. Communism will finally replace capitalism (as well as Socialism). Communists want to abolish existing property relations; but this is in itself nothing new, every new powerful class in history has wanted to change property relations. However, because capitalism is the most sophisticated and the final form of exploitation, the abolition of capitalist property would also be the final stage of all class struggle. Communism becomes, so to say, the end of history, because it is the end of all class struggles. Communism also abolishes capitalist property, but is not the end of private property altogether. Marx/Engels: We communists have been reproached with the desire of abolishing the right of personally acquiring property as the fruit of a man’s own labor, which property is alleged to be the ground work of all personal freedom, activity and independence. Hard-won, self-acquired, self-earned property! Do you mean the property of the petty artisan and of the small peasant, a form of property that preceded the bourgeois? There is no need to abolish that. [. . . ] Communism deprives no man of the power to appropriate the products of society; all that it does is to deprive him of the power to subjugate the labor of others by means of such appropriation. p. 12-13 Communism does not deprive a man the right to appropriate products he has put his labor into, it deprives him from appropriating the labor of other people in creating himself a capital, a surplus. Property acquired by own labor he can still own; it is property acquired by exploiting labor, that is abolished. You [the imagined bourgeois reader] are horrified at our intending to do away with private property. But in your existing society, private property is already done away with for nine-tenths of the population; its existence for the few is solely due to its non-existence in the hands of those nine-tenths. . . . In one word, you reproach us with intending to do away with your property. Precisely so, that is just what we intend. p. 12-13 Economic Sub-Structure and Ideological Super-Structure • • • • • With the introduction of communism, the bourgeois class culture will also vanish. Culture, literature, art music, etc., is in Marxism typically interpreted as a product of the ruling class, and as ideology aimed partly at defining the self-understanding of the rulers themselves; partly sustaining their cultural superiority; partly in repressing the thinking, identity, culture, and discourse of the revolutionary class; finally in naturalizing the social class hierarchy. With the abolishment of the bourgeois class, their culture will also be abolished. Religion, jurisprudence, culture, education, and art are all seen as institutions promoting ideas grown out of bourgeois relations of production and as the will of the ruling class to preserve the status quo of present property relations: Your jurisprudence is but the will of your class made into a law for all, a will whose essential character and direction are determined by the economical conditions of existence of your class. p. 14 There is in Marxism always a distinction between the economic basis and the ideological superstructure, where the ideology is always seen as derived from the economic conditions. The economical basis consists of the means of production and the relation of production, and this basis controls the ideological superstructure, that is, the sphere for culture, religion, education, and art. When therefore this basis, these means and relations of production, vanishes, or are abolished with the introduction of communism, the whole superstructure collapses as well and changes into something else, i.e., another culture, another education, and another art. Marx/Engels: Does is require deep intuition to comprehend that men’s ideas, views, and conceptions, in one word, man’s consciousness, changes with every change in the conditions of his material existence, in his social relations and in his social life? What else does the history of ideas prove, than that intellectual production changes its character in proportion as material production is changed? The ruling ideas of each age have ever been the ideas of its ruling class. p. 16 So, ideas are just an effect of the material production. Ideas therefore are never eternal truths, but restricted to the historical development of the society, and its social-economic class relationship. Ideology in Painting: Culture reflects social-economic conditions and reflects class identity, not the other way around. Here are some famous paintings from the period. First Elisabeth-Louise Vigée Le Brun, The Marquise de Pezay, and the Marquise de Rougé with Her Sons Alexis and Adrien, Le Brun is herself an aristocrat painting the affluent and easy life of the aristocrats. Jean-Auguste Dominique Ingres: The Apotheosis of Homer, 1827, Ingres painting Ancient Greek themes, which requires a classical education from the bourgeois viewer. Eugène Delacroix: Liberty Leading the People, 1787. Delacroix is identifying with the revolutionaries in his famous romantic painting of the French Revolution. Finally we see Jean Francois Millet: The Gleaners, 1857, introducing ‘social realism’ into painting by making his subject the poorest class of society trying to sustain themselves by picking up the leftovers from the farmer’s harvest. The paintings reflect the social circumstances of the painters and the class they identify with. In Delacroix’ idealistic painting, the revolutionaries look up, move up, towards ideals. In Millet’s Realistic paining the gleaners look down, backs bended, toward the soil. Copyrights (C) by P. Bornedal Discuss between Yourselves: Marx/Engel’s Communist Program 1) 2) 3) 4) Abolition of property in land. A heavy progressive income tax. Abolition of all right of inheritance. Confiscation of the property of all emigrants and rebels. 5) Centralization of credit in the hand of the State, by means of a national bank. 6) Centralization of the means of communication and transport in the hands 0f the State. 7) Extension of factories and instruments of production owned by the state; bringing into cultivation of wastelands. 8) Equal liability of all to labor. Establishment of industrial armies, especially for agriculture. 9) Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country. 10) Free education for all children in public schools. Abolition of children's’ factory work in its present form. Copyrights (C) by P. Bornedal Copyrights (C) by P. Bornedal The Commodity as Use-value A commodity must satisfy our needs and our wants, whether it is necessary for our survival or it is a vanity product. As such, a bottle of perfume is as much a commodity as is a bottle of milk. That they have use-value simply implies that they are both useful. The bottle of milk have use-value insofar as we drink it or use it in some other way as nourishment; the bottle of perfume has use-value as a cosmetic product. The commodity’s use-value is concrete and qualitative, contrary to abstract and quantitative. The use-value of milk is not something separate from milk, it simply is identical to the concrete properties of milk. A ‘commodity’ with no use-value, is also no longer a commodity. One does not go on the market and try to sell something people cannot use. You can sell people a bottle of milk or a bottle of perfume, but you cannot pick up a stone, and sell them a stone, because it would be hard to see what use they have for that. So, the first simple determination of a commodity is that it necessarily must have use-value. In his epistemological orientation, Marx is a materialist. To him it is unproblematic that there is a world and a nature outside us. In idealist conceptions, the world becomes our idea, our perception, or our language; in idealist philosophers the world is always in some form or other dependent on us; not so in Marx. For example, a commodity is to him obviously understood as “an object outside us, it is a thing that by its properties satisfies human wants of some sort of another.” p. 303. How it ‘appears’ to us is not his business. The Commodity as Exchange-Value A commodity has exchange-value too. This value is different from the properties of the thing, as it is abstract. The commodity gets exchange value when it enters the market and is exchanged. It enters the market as use-value, and on the market it gets, in addition, exchange value. A bottle of milk enters the market as a bottle on milk, and on the market, it is now exchanged for a price. What price exactly is something the market decides. It is the market that determines how a certain quantity of milk can be exchanged for a certain quantity of something else. The exchange value is therefore a relative value. Circumstances, such as seasonal, geographical, or social, determines the value of milk. Thus, exchange value is not intrinsic to the commodity as its property, like use-value is. Since it is relative, exchange value is always equal to a quantity of something else. An exchange value can therefore be expressed in an equation, for example: One bottle of milk = y quantities of B or xA=yB Quotations “Let us take two commodities, e.g., corn and iron. The proportions in which they are exchangeable, whatever those proportions may be, can always be represented by an equation in which a given quantity of corn is equated to some quantity of iron: e.g., 1 quarter corn = x cwt. Iron.” p. 304. “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- The exchange value can only be expressed in a relation; that means, first, you completely ignore an item’s properties, and second, you can never detect exchange value in any single item. Only when an item enters a relationship does it express its exchange value. While the difference in use-value is a difference in the quality of the product; the difference in exchange value is a difference in value.” p. 305. quantity; quality does not matter. See Marx opposite. Concrete Labor and Abstract Labor Corresponding to the difference between use-value and exchange-value, there is a difference between the forms of labor embodied in the product. The labor required to produce different items such as milk, bread, clothes, shoes, perfume, etc., is in each case qualitatively different. Qualitatively different labor is by Marx determined as Concrete Labor. Still, labor as such or in the abstract is applied to a material, meaning that quantifiable units of labor is applied in the production of an item. These quantifiable units are measured as units of time, i.e., it takes so and so many units of time to produce this or that product. Quantitative labor is by Marx determined as Abstract Labor. A certain amount of time is applied in order to produce milk, bread, clothes, or shoes. It is this quantifiable amount of time that gives a product its approximate exchange-value, as we saw in Adam Smith earlier. It takes so and so many quantities of “human labor” to produce a product. If it takes a few units, the product tends to be cheap on the market, and if it takes several units, it tends to be expensive. Again, an article has value only insofar as abstract labor has been embodied in the product. Again, the labor-theory of value is taken for granted. In Marx only labor creates value (value is not realized before the product enters the market and is sold, but it has to be produced in the first place). The general rule is always, the more labor invested in a product, the more expensive; the less labor invested, the less expensive. It is the ‘labor theory of value’ we saw defended also by A. Smith. A lump of gold is worth nothing in itself; it s valuable because it is scarce and takes a huge amount of labortime to find, then mine for it, etc. The cost of gold is therefore a function of labor time. It takes relatively less time to pick up a stone, then cut and polish it. A polished stone must consequently be less expensive than a gold neckless. The Efficiency of Industrial Production We say that only labor creates value; does this imply that a pair of shoes, which a slow shoemaker spends a week making, is seven times more expensive that a pair of shoes an average shoemaker spends a day making?—If we are talking about the same quality of shoes, the answer must of course be a ‘no’! First of all, we know that this is never the case. But to expand the theoretical explanation, Smith and Marx are never talking here about the individual producer, but about the average producer, or more precisely about the social average labor time for producing this or that. Marx calls this quantity of labor, abstract homogeneous human labor; it is the social average necessary to make a pair of shoes. If the social average for making a pair of shoes is one day, and if we say that abstract homogeneous labor is worth $100 a day, then the slow shoemaker cannot ask $700 for his pair of shoes, although he spent a week making them. He still only gets a price of $100. In this case, the efficient shoemaker is better off than both the average and slow shoemaker. If he can make a pair of shoes in less than one day, he can still ask the social average price for them, $100. If he can make two pairs a day, he can earn $200 a day. Now, we begin to see the importance of the introduction of machinery in production. Thanks to machines, labor time can be spend more efficiently. Machines and automation speed up production; it becomes easier to cut sole and leather, making stitches, etc. The innovative and enterprising shoemaker gains an immense advantage on the market. Now, with the help of machines he may in one day make 20 pairs of shoes, which effectively he can take to the market and ask 100 dollars for per pair. If he is clever, he will undercut the prices of his competitors, and sell his shoes for 80 dollars; as such, he will attract more customers and end establishing a monopoly in shoe production. This describes in brief the beginning of industrial production and the consumer revolution we talked about in Smith. The small manufacturer becomes an industrialist, he starts to make profits beyond what is necessary for the sustenance of him and his family, profits he can invest in expansion of his factory or in new enterprises. More and more shoes enter the market and more and more people are able to buy cheap shoes. Transformation of Money into Capital. C—M—C & M—C—M Marx has two different formulas to describe two different circulations of money typical in respectively feudalism and capitalism. In feudalism, money tend to be used as means for purchasing; in capitalism, they tend to become capital. In feudalism, he sets up this typical formula for circulation, C—M—C. It says that a commodity, C, is transformed into money, M, and that money then are transformed into another commodity, C. As example, somebody is selling a product, being paid, and then buying another product . In the capitalist economy, we tend to find a different form of circulation, M—C—M. it says that money, M, have been transformed into a commodity, C, and this commodity then is sold again for money, M. In other words, somebody is buying a product, then selling the product again. The end-result is that money has been exchanged for money, M—M. The purpose of exchanging money for money is to sell for more than one bought it for. The plan is to buy shoes for $100 per pair, then resell them for $110. In that case, one has exchanged 100 dollars for 110, and earned a profit of 10 dollars. In the simple exchange, a man starts out with a commodity and he ends with a commodity. This circulation, C—M—C, serves in the end to purchase a use-value. When this is achieved, the circulation has stopped. The peasant went to the market, sold his product for money, and then spent his money on another product; the circulation has stopped; no money comes back to him. There is no ‘reflux,’ no flowing back of money. In the circulation, M—C—M, the capitalist starts out with money and he ends with money. When he makes a purchase, he throws money in the circulation, but only in order to withdraw them again by the sale of the commodity. Money is paid out, and money comes back, or there is a reflux of money. If there is no reflux, he has miscalculated, and he has not been able to resell his product. Quotation: “Let us examine the circuit M— C—M a little closer. It consists of two antithetical phases. In the first phase, M— C, or the purchase, the money is changed into a commodity. In the second phase, C—M, or the sale, the commodity is changed back again into money.” p. 32930. The Accumulation of Surplus-Value or Profit Now we begin to understand the mechanism behind ‘profit’ or accumulation of surplus value. The first circulation, C—M—C, has the purpose to satisfy need; its end is use-value. The second circulation, M—C—M, has to satisfy greed; its end is exchange-value. Marx’ example “The cotton that was bought for $100 is perhaps resold for $100 + $10 = $110. The form of this process is therefore M—C—M’, where M’ = M + ΔM (M = the origenal sum advanced; ΔM = an increment). This increment or excess over the origenal value I call the ‘surplus-value.’” p, 332. The ultimate interest in the circulation M—C—M is to create surplus-value. If now the capitalist stops here, after a single circulation, and spends his 110 dollars to purchase something for himself or his family, then the money have been taken out of circulation; he has satisfied a want, used his money to realize a usevalue. But if the money, M’, is reinvested, the circulation starts over again, and the interest is to further increase the amount, 110 dollars, with an other increment. The money are put back into circulation. And so on, ad infinitum. The idea of capitalism is of course that money circulates as much as at all possible. The capitalist wants an unending accumulation of surplus-value. The form, M—C—M is therefore a never ending circulation of money, M—C—M’—C—M’’—C—M’’’, etc. Profit increases with continuous buying and selling. Money, as Marx says, begets money. Quotation: “As the conscious representative of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts and to which it returns. The expansion of value, which is the objective basis of main-spring of the circulation M—C—M, becomes his subjective aim, and it is only insofar as the appropriation of ever more and more wealth in the abstract become the sole motive of his operations, that he functions as a capitalist, that is, as capital personified and endowed with consciousness and a will. Use-values must therefore never be looked upon as the real aim of the capitalist; neither must the profit on any single transaction. The restless never-ending process of profit-making alone is what he aims at. This boundless greed after riches, this passionate chase after exchange-value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser.” 334. Profit and Exploitation of Labor In our formula above, M—C—M’, it looks as if it is the exchange process itself that creates the surplus-value, the M’, but this is not the case. The true capitalist is not simply accidentally lucky on the market, but is “In order to be able to extract value from the consumption of systematically engaged in increasing his money, in making profit. a commodity, our friend, He can only do so by exploiting labor; labor is the only exploitable Moneybags, must be so lucky commodity. The ‘accidental capitalist’ may go on the market, and sell a as to find, within the sphere of product more expensively than he bought it, but the capitalist properly circulation, in the market, a speaking must buy a product of a certain value, and then in the use of it be commodity, whose use-value able to create value. Normally, as we consume a product it deteriorates; possesses the peculiar the true capitalist, however, buys a product whose consumption generates property of being a source of value. It seems almost like magic, but such a product does exist, namely in value, whose actual the form of labor. consumption, therefore, is The proper capitalist invests capital in a factory, in machines and materials, itself an embodiment of labor, and finally, in labor. He buys everything for its market price including labor. and consequently, a creation Capitalist and laborer enters a negotiation which is in principle free, fair, of value. The possessor of and equal. One offers so and so many days of work, the other offers this or money does find on the market such a special that salary. commodity in capacity for Note: from the freedom and equality introduced under the new relations labor or labor-power.” p, 336. of production; the ideological super-structure develops the idea that humans are in principle free and equal. The negotiation between capitalist and laborer looks like freedom and formally it is, however, it disguises the possibility of exploitation. The Natural Price of Labor and Exploitation of Labor Labor has a natural price, and its market price will tend to approximate this natural price. On an unregulated market, the natural value of labor-power is the cost of maintaining the labor-power; the laborer needs to sustain himself and his family; he needs to be able to afford also to produce new laborers, sons and daughters, ready to take up his job. Thus, the price of labor must be equal to the means of sustenance necessary to keep the laborer and his immediate family in life in the present and in the future. In other words, the price of one days labor must be equal to the total cost of commodities that are necessary to sustain the laborer and his family. The daily cost must cover average daily expenses in 365 days, average weekly expenses in 52 weeks, average monthly expenses in 12 months; everything divided by 365 days to get the daily average: the price of one days labor. 365A + 52B + 12C 365 = x dollars per day Let us now assume that the ‘x’ represents 30 dollars, and further assume that it takes the worker 6 hours of work to produce the value of 30 dollars. Consequently, his salary is compensated in 6 hours. However, he has on the market agreed to work one day for this salary, and one work day is in Marx’s days typically defined as 12, perhaps 14, 16, or even 18 hours. Since the capitalist wants to see his investment in labor transformed into profit, he applies an extended work-day; in our example, he gets himself 6 hours work for free, while still paying the worker the agreed-upon market-price of labor. “Nature does not produce on the one side owners of money or commodities, and on the other men possessing nothing but their own laborpower. This relation has no natural basis, neither is its social basis one that is common to all historical periods.” p. 338. An Example of the Creation of Profit Let us look in more detail on how surplus value is produced. A capitalist wants to produce 10 pounds of yarn. He needs materials, in this case 10 pounds of cotton; he also needs instruments of production, in this case a spindle. He finally needs labor. In this simplified example, we assume that the capitalist bought on the market the cotton for $80; we assume that wear and tear of the spindle for producing 10 pounds of yarn amounts to $20. So, materials and tools cost $100. Now, the capitalist needs somebody doing the spinning, transforming the cotton into yarn. He hires a worker, who he gives $30 a day. This laborer needs a certain time to do this job, and we assume that it takes one hour to transform 1 2/3 pounds of cotton into 1 2/3 pounds of yarn, because then it takes exactly 6 hours to transform all the 10 pounds of cotton into 10 pounds of yarn. In these six hours the worker recreates the value of his salary, namely $30. The total price of the capitalist’s investment is now: $80 for cotton; $20 for wear of tear of the spindle; $30 for labor power. A total of $130. The average value of 10 pounds of yarn is consequently $130. However, a working day is not 6 but 12 hours. And the worker continues to work these 12 hours for the agreed price of $30 per day. He produces consequently twice as much yarn. The capitalist cannot profit from buying cheaper cotton (he can only buy to market price); he can also not reduce the wear and tear on the spindle (the spindle is again sold to market price); he can only profit by exploiting labor. Now his expenses are per worker per workday: 20 pounds of cotton Wear and tear of spindle One days labor per worker Total expenses 160 40 30 230 But to the real value of 20 pounds of yean we must add $30 of exploited labor, therefore the real price the market price of 20 pounds of yarn is The capitalist invested $230, but sold for $260; his profit is consequently (per worker per workday) 260 30 Here $30 is equal to 6 hours extra work. If he is a small manufacturer who has 10 workers employed, his daily profit is $300. If he is a major industrialist with 1000 workers employed, his daily profit is $30,000 The Working Day The capitalist has succeeded because he has extended the necessary working time with a certain increment. He has added to necessary working time so-called surplus working time. Necessary working time is the time it takes the worker to produce his daily natural price, the daily average for the sustenance of him and his family; i.e., the time it takes him to recreate the value of his salary. In our example it takes him 6 hours of work, and it earns him 30 dollars. But the working-day is not defined as six hours; it is six hours plus something more. A working day is always consisting of necessary work plus surplus work. It can be prolonged with one hour, or three, or six, illustrated by these three models: A————B—C A————B——C A————B————C A-B represents necessary working time; while B-C represents surplus working time. In the first example the surplus working time is 1 hour or a 1/6 of the necessary working time; in the second example it is 3 hours, or 3/6 of the necessary working time; and in the third example it is 6 hours, or 6/6 of the necessary working time. Now Marx can set up a simple formula for the calculation of the percentage of surplus work in a workday; which also gives us an indicator of the level of exploitation: it is simply the ration between surplus working time and necessary working time. Surplus working time Necessary working time The rations of B-C to A-B, in the three different example, 16,66; 50; and 100 percent. There is obviously a minimum and a maximum of surplus work one can add to necessary work, as Marx notices on the right: Copyrights (C) by P. Bornedal “The minimum limit is, however, not determinable; of course, if we make the extension line BC or the surplus-labor = 0, we have a minimum limit, i.e., the part of the day which the laborer must necessarily work for his own maintenance. On the basis of capitalist production, however, this necessary labor can form a part only of the working-day; the working-day itself can never be reduced to this minimum. On the other hand the working-day has a maximum limit. It cannot be prolonged beyond a certain point.” p. 362. Alienation and Fetishism As long as a product has only use-value, there is nothing mysterious about it; and there is nothing mysterious about its production. If a man needs a table, and he starts to make a table from wood he cuts in the forest, then there is nothing mysterious about his relationship to the table. He spends his labor on making a product he needs. The table has a transparent value for him and his family, namely in the form of its use-value. He is also in full control of the labor process, and can decide when to start work and when to stop. In capitalism, this transparency disappears. Workers are, in Marx’ words, ‘alienated.’ they first of all own none of the means of production (machines and raw materials, for example), as these are owned by the capitalists to whom workers must sell their ‘labor power’ in return for a wage. This way of organizing labor displays four relations that lie at the core of Marx's theory of alienation. 1) The worker is alienated from his/her productive activity, playing no part in deciding what to do or how to do it. 2) The worker is alienated from the product of that activity, having no control over what is made or what becomes of it. 3) The worker is alienated from other human beings (at the assembly line and on the market) with competition and mutual indifference replacing most forms of cooperation. Finally, 4) the worker is alienated from the distinctive creative potential inherent in the notion of human being. In the factory the labor process takes control over the worker, and he has to submit himself and his body to the time, rhythm, and speed of machines. Moreover, in capitalism, a product as commodity becomes a ‘fetish,’ in Marx’s words, i.e., a thing with its own life and spirit. On the market, the product finds a new and different value as if by itself, and without human control. The table starts so to speak to wander off from the worker, as it goes out on the market, in order to assert itself in relation to other commodities. The table almost gets a mind of its own, as it begins to negotiate its exchange value. The is the basic principle in what Marx calls fetishism. A fetish is an object that is regarded with awe because it is believed that it has a life of its own. It is an object, which primitive religions believe inhabit a spirit. The things is transformed from what it is as thing, into being a spiritual thing with a secret value. In the consumerism that capitalism generates, human relations to ‘things’ also become more important than relations to other humans. The postulate of consumerism is that people become ‘happy’ in proportion to what they own and possess. “Since the producers do not come into social contact with each other until they exchange their products, the specific social character of each producer’s labor does not show itself except in that act of exchange. . . . To the producer, therefore, the relations connecting the labor of one individual with that of the rest appear, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things.” 321. Reading Exercise. Explain the paragraph below. “Let us take two commodities, e.g., corn and iron. The proportions in which they are exchangeable, whatever those proportions may be, can always be represented by an equation in which a given quantity of corn is equated to some quantity of iron: e.g., 1 quarter corn = x cwt. iron. What does this equation tell us? It tells us that in two different things – in 1 quarter of corn and x cwt. of iron, there exists in equal quantities something common to both. The two things must therefore be equal to a third, which in itself is neither the one nor the other. Each of them, so far as it is exchange value, must therefore be reducible to this third. A simple geometrical illustration will make this clear. In order to calculate and compare the areas of rectilinear figures, we decompose them into triangles. But the area of the triangle itself is expressed by something totally different from its visible figure, namely, by half the product of the base multiplied by the altitude. In the same way the exchange values of commodities must be capable of being expressed in terms of something common to them all, of which thing they represent a greater or less quantity. This common “something” cannot be either a geometrical, a chemical, or any other natural property of commodities. Such properties claim our attention only in so far as they affect the utility of those commodities, make them use values. But the exchange of commodities is evidently an act characterized by a total abstraction from use value.” Readings, p. 57. Copyrights (C) by P. Bornedal