The Economics of Capitalism

In 1867 Marx brought out his Capital, a searching analysis of the basis of Capitalism, and since that date it has been the backbone of the Socialist Movement. Here we can only attempt to give a brief outline of some of his conclusions

The Problem of Value
Under Capitalism the overwhelming mass of products are produced solely for the purpose of being sold at a profit; this was not true of any of the previous social systems, neither in ancient nor in mediaeval times. As the system lives by the continuance of buying and selling, that which determines the value of goods, the source of value itself, is a problem fundamental to it The problem of value is an old one, as old as Aristotle who knew that there must be some property, apart from its usefulness, that was common to all articles of commerce, articles as unlike as bread and shoes, that made it possible to measure them one against another in a value relation. But he never got farther than putting the problem. The slave-based society in which he lived hindered even his acute mind from arriving at a solution, and it remained shrouded in mystery until buying and selling as a social system commenced to emerge m the Seventeenth century. The restraints upon industry and commerce melted into the right of everyone to do what he liked with his own, and the labourer, without property, was free to sell his working energy at whatever price he could get. Then the problem came up in an acute form as the rush to become rich developed. It was inspired by a desire to find out how wealth accumulated; or, to put it another way, to find out the source of surplus value.

Early Contributions to the Solution
The first real contribution to the solution of the question was made by Sir William Petty who, in his Treatise on Taxes (1662), stated that labour was the source of value, but, defining exchange value as money, he claimed that the particular labour employed in the production of the precious metals was the only labour that produced value. Later Benjamin Franklin tackled the problem in an essay entitled A Modest Inquiry into the Nature and Necessity of a Paper Currency (1729), arguing that the value of articles is measured by the time taken to produce them. Money, however, according to him, had an extra value owing to the way it facilitated exchanges. Adam Smith followed with his Wealth of Nations (1777) in which he urged that the determination of the value of an article by the time ‘taken to produce it was true of earlier times but not of the time in which he lived. He attributed the accumulation of wealth to the division of labour and confused the value of what a labourer produced with the wages he received for producing it. The final contribution to the investigation, before Marx commenced to publish the results of his studies, was made by Ricardo in his book On the Principles of Political Economy and Taxation (1817). In this book Ricardo got close to the answer, arguing that the values of all articles, including the value of labour-power, was determined by the labour required to produce them under the prevailing conditions of skill and methods. When applying his theory, however, he went astray because he did not see the distinction between labour and labour-power with sufficient clearness, and, hence, that the accumulation of wealth in the form of capital was based upon the buying and selling of labour-power. It was the discovery of this fact that gave Marx the key to the problem.

The Wealth of To-day
As the wealth of capitalist society consists of commodities, useful articles produced for sale, Marx commences his investigation with the analysis of a commodity. The things we eat and drink, the clothes we wear, the houses we live in, and the transport that conveys us to wherever we wish have all been made for the purpose of being sold. They appear in the shop windows or showrooms with price tabs attached, or they appear in price-lists of goods offered for sale, or again they are advertised as something for which a price will be stated if requested. In other words they are goods produced for sale whether they be butter or battleships, salt or sables. Nothing is produced for sale unless it is considered to be useful to somebody for some purpose, whether the purpose be good or bad or both. Of course many things are produced and sold that the buyer finds are not what they were pretended to be; they were sold under false pretences and the buyer was defrauded; but this is not true of the mass of things produced, though many may not come up to the level claimed for them by their sellers. The wealth of to-day, then, consists of commodities— articles of commerce, things that are the subject of buying and selling. This is real wealth, or economic wealth. Whatever philosophers or poets may have said a man is considered wealthy to-day according to the amount of his material possessions or the size of his effective claim upon them; a man is considered poor because of his lack of them, and to the poor group the majority of society belong.

Why Things Sell at Different Prices
As useful articles there is nothing mysterious about commodities; they are pots and kettles, loaves of bread and pats of butter. The more you have of them the better off you are, but to get them you must pay varying prices. This is where the difficulty arises. Why do things sell at different prices? Why is it that those things which it is almost impossible to live without. such as bread, butter and milk, sell at low prices compared, for instance, with diamonds which we need far less? Why does a linen coat cost a few shillings and a fur coat cost a few hundred pounds? To answer these questions we must first find out what prices are and how they are arrived at. We have said that a commodity is a useful article, but it is also an article of value because, to get it, you must pay a price, its exchange value. We have already noticed that its usefulness has nothing to do “with its price; we are speaking, of course, of the normal operations of commerce; the hundreds of pounds a man in the desert, dying of thirst,, might be willing to pay for a bucket of water “has nothing to do with the case.” In normal times a tiny diamond may exchange for as much money as many tons of bread, and the price of water is infinitesimal. As use-values commodities are of different qualities—softness, hardness, thickness, and the like; but as exchange-values they are of different quantities—20 loaves, 10 coats, 2 pairs of shoes, and the like. Exchange value is a relation of quantity, 20 loaves of bread for ten shillings; it is the quantity of loaves and the quantity of shillings that matter. In this exchange relation, 20 loaves equals ten shillings, the loaves and the shillings contain something that is equal in each and yet can be distinguished from their physical appearance; the loaves and the shillings are equal to a third thing which is neither the one nor the other. If we leave out of sight their usefulness, which is tied up with their physical properties, commodities have only one thing in common; they are products of labour, they are the result of the application of human labour to materials provided by nature. When looked at only as products of labour articles are values. Exchange-value, such as twenty loaves of bread equals ten shillings, is the only form in which the value contained in a commodity is, and can be, expressed. The quantity of labour required to produce twenty loaves is the same as the quantity required to produce ten shillings, for the ten shillings is a fixed portion of a fixed piece of gold, as we shall see later. Thus the size of the value contained in an article is measured by the quantity of labour contained in it, and the quantity of labour itself is measured by the time the labour is in action—so many hours of work. As the illustration indicates, value can only be expressed relatively, the value of one article in relation to another. It is only because they are the products of human energy that articles can be measured against each other as values, and from this it follows that their quantity relation to each other varies with variations in the productiveness of labour; at different times, with changes in the productiveness of labour, we may get more or less than twenty loaves of bread for ten shillings.

The Effects of Competition
Although the quantity of the value contained in an article is determined by the amount of labour required to produce it, this does not mean that the less efficient the labour the greater the value of the article. All commodities are produced for the market, that is. for sale, and buyers endeavour to obtain each particular kind of commodity as cheaply as possible; they buy in the cheapest market. The system of commodity production is a competitive system and each producer tries to produce as cheaply as possible in order to get as large a share of the demand as possible. This drives each producer to search for new machines and better productive methods in order to produce goods cheaper than competitors. The result is that, in general, the amount of labour required to produce a given article is constantly being reduced. All producers are compelled to introduce the latest methods or be left behind in the struggle for markets. Where producers fail to keep pace with improvements in production they gradually lose their trade and are finally faced with ruin. Two hundred years ago hand work, or handicraft, was the prevailing method of producing commodities; then machines were introduced and gradually monopolised all forms of production. The hand workers who were unable or unwilling, to adopt the new productive form, fought a losing battle for decades until finally the only prices they could get for their products against the machine-made article had reached such a low level that they could not earn enough to live, and they had to give up. Thousands of them eventually died of starvation.

Thus, at any given moment, there is an average amount of labour, recognised by society in practice, that is required to produce a given product, and it is this average amount that determines the value of the commodity. Where, through inefficient organisation, more labour than is necessary is spent on the production of a commodity it will only have a value equivalent to the average amount necessary in a particular society at a given time. Value-producing labour is therefore average socially necessary labour, and the producer ignores this fact at the cost of ruin to himself, a ruin that we see every now and again reported in the newspapers.

Skilled Labour more Intense than Unskilled
There is another aspect of this value-producing labour that needs to be understood. Articles that are produced in a relatively short time appear to have the same value as those that take much longer to produce. At first sight this is puzzling. A group of men working on a farm in the country without machinery will produce articles of an annual value that is only equivalent to what the same number of men will produce in a few weeks in a highly organised machine factory. The explanation of this is that, in estimating value, it is necessary to consider all the labour that is incorporated in the production of an article. The more complicated the task the more intense the labour, that is to say the more of simple labour is compressed into an hour of its use. Nowadays, for instance, in even the comparatively simple labour possessed by a boy leaving school there is incorporated a portion of the labour of teachers who taught him, scientists who made certain knowledge available, and the labours of those who made the maps, tools, and other teaching appliances. Thus, in the machine made product, there is involved the labour of toolmakers, machine makers and hosts of other allied workers, all of whose labour appears in the final commodity and takes part in determining its value. Skilled labour, therefore, compresses in an hour of work several hours of simple labour.

GILMAC