September 30 – October 4, 2002
Capital – Volume 1 -- Continued
7. Exchange and money
In the first chapter of Capital, Marx outlines several different stages through which exchange and exchange value pass – from simple to more complex forms. Theoretically and historically, the simple, isolated or accidental form is the initial way that exchange occurs. This is a haphazard form, where the producers of two different products exchange the products of their work. No regular price or value may develop from this. But as exchange of products become a more regularized feature of a society, markets develop and exchanges become more common and generalized, with the result that exchange-values acquire what Marx terms a ‘total’ and then a ‘general’ form. As this develops further, exchange values become regularized, with the rates at which different commodities exchange becoming better known, relatively stable, and applicable to more products and over a wider region. This allows one commodity takes on the role of universal equivalent, that is, an object that can be used to measure values of other commodities and be used widely in exchange – examples are the use of cattle in East African societies and cigarettes in world war two prisoner of war camps.
As market exchange becomes more and more regularized, the universal equivalent becomes so widely and generally acceptable, that it can be called money. Marx notes that “the universal equivalent form, has now by social custom finally become entwined with the specific natural form of the commodity gold” (p. 162). Money could be any commodity but historically gold and silver became the money commodity – because of their scarcity, durability, divisibility, and widespread acceptance. That is, these precious metals had ideal qualities to become the money commodity. Today the forms of exchange have developed even more, so that money has developed an independence from the tangible form – it is now based on trust and confidence and some assurance of its continuing value and acceptance. Rapid changes in price and dwindling value of paper money can quickly lead to abandonment of regular currencies, as happened last year in Argentina.
Conceptually then, exchange is first associated with barter, and as markets and exchange develop, there is some use of money, until the value of all commodities are stated in money terms, and the monetary form of exchange begins to dominate. Behind all this, Marx argues that value continues to be created by labour, and the money form merely hides this.
Marx discusses various stages of the development of exchange and money in chapters 2 and 3 of Volume I of Capital. Note how he applies the historical-theoretical method.
8. Forms of commodity production
In order to understand the different forms of commodity production and the emergence of surplus value, as a fully developed capitalism develops from occasional market exchange, Marx outlines various stages to commodity production. These are historical stages that developed in Western Europe: beginnings of markets in towns and cities of Europe, merchant capitalism or mercantilism, the putting-out system, factory production, and industrial capitalism (see Hadden, pp. 65-66). Marx’s explanation of the various stages of commodity exchange are also a logical or theoretical explanation of the forms of exchange that emerge from the contradictions built into the commodity.
a. Simple commodity production
In order to illustrate the theoretical difference between these stages of commodity exchange, Marx sometimes used diagrams involving C (commodities) and M (money). Marx does this beginning in Chapter 3 of Capital.
Simple commodity production “is a condition where many people are independent, small producers who own the products of their labour and sell these products for the other things they need” (Hadden, p. 66). In simple commodity production the circuit of exchange can be characterized as
C — C
where commodities exchange for commodities. This could be a fairly well established system of barter, redistribution, or exchange, where exchange values are well known, but money had not yet entered the system.
There are several features of this form of commodity exchange that make it different than fully developed system of markets. These are as follows:
i. Production closely related to use. Since money does not dominate at this stage, production tends to be closely related to use – with overproduction not an economic problem and no accumulation of capital. If profits are made by one of the parties in exchange, this would be a result of cheating or unequal exchange.
ii. Limited commodity fetishism. Since products are exchanged between the actual producers of these products, the manner in which social labour is related to these commodities is relatively apparent to those making the exchange. This means that social relationships are not hidden, as in commodity fetishism in a highly developed market system.
iii. Market does not dominate. Social inequalities may exist in this form of society, as in a feudal form of social organization, but these inequalities do not emerge from commodity exchange and markets. Rather, markets are an adjunct of other social arrangements and commodity exchange does not interfere with these. That is, society is not dominated by markets and social structures are organized on a non-market basis.
Human labour is used to produce the commodities entering exchange, and those commodities exchanged are used for consumption, that is to satisfy human needs. For a producer of a commodity, labour and consumption enter simple commodity production as follows:
That is, a producer uses his or her own labour to produce a commodity, exchanges this commodity with some other commodity with use-value for him or her, and uses the commodity for personal consumption or for production.
Such a method of exchange is limiting and inefficient. It may not be possible for producers to find other useful commodities that producers of those latter commodities wish to trade. Historically, what tended to happen as commodity exchange became more regular is that one commodity became acceptable in exchange, and took on the characteristic of money. Historically, objects that are valued but scarce, such as cattle, tobacco, silver, or gold, have become money. Once money (M) does develop, then the situation may initially change little and can be characterized as C – M – C.
That is, a produced that produces an object sells it for money, and in return, the money received is used to purchase another commodity, which is ultimately used for consumption. At both ends of the exchange are commodities, and these exchanges characterize a system of production that is fairly closely connected to use. So long as money is not hoarded for a long time, the circuit is complete, and exchange continues. In this case, money merely makes the exchanges a little easier, ensuring that each seller need not come directly or immediately into contact with the producer. So long as the value of commodities at each end of the exchange is equal, accumulation does not occur and simple commodity production is characterized by a rough equality of producers. Further,
The C – M – C circuit of commodities existed through much of recorded human history, allowing trade over greater distances, exchange of more products, and more producers to become involved in exchange. But in such a system, production is fairly closely related to use and the market need not dominate society, although there may be some development of commodity fetishism. That is, the social relationships standing behind exchange may not be so apparent, especially is trade is over long distances. In this type of exchange, there is no mechanism to ensure equal labour times are exchanged and a system of values characterized by abstract or homogeneous human labour does not develop.
Once money is introduced into this system, there is a possibility for surplus value and capital accumulation to develop. This leads to a new form for the circuit of commodities.
b. Self-expansion or valorization of capital
As commodity exchange and a money economy developed, there was a quantitative expansion of trade. And at a certain stage of this development there is a qualitative change in the form of the circuit of commodities from one dominated by use-values to one dominated by exchange values. That is, the form changes from production and use being the starting and ending point of commodity exchange to one where money is the beginning and ending point of the exchange. The circuit of commodities changes from
C – M – C to M – C – M' where M' > M
For this new form to make sense, M' must exceed M, otherwise the M – C – M' exchange would not take place, at least not on any continued basis. In this new form, money becomes capital and the aim of the exchange is the self-expansion of capital. The larger implications of M – C – M' are that money becomes part of the superstructure of the economy, with its value and movement acquiring an independence of commodities and a life of its own. Banking, credit, and financial crises all begin to develop. So long as the C –M –C exchange dominated, production was fairly directly related to meeting human needs or desires. But as soon as the money form becomes reasonably well established, and some who begin to have more money seek to expand the quantity of money they have, the form of exchange differs, where the beginning and the end of exchange is characterized by exchange value. The pursuit of exchange values and increases in those values begins to dominate exchange and markets. Marx notes that “its driving and motivating force, its determining purpose, is therefore, exchange-value” (p. 250).
Historically, the beginnings of the M – C – M' form of exchange in Western Europe emerged as feudalism declined and towns grew. Merchants began to sell the products of artisans over long distances and began to gain control of the production of goods through the putting-out system. Later the merchants began to organize the production into workshops or small factories, thus beginning the devectories, thus beginning the deve capitalism. Marx traces these developments in chapters 25-33.
M - C - M' constitutes the beginnings of a system of capitalism, or at least of self-expansion of capital, and capital accumulation. This set of transactions expands the amount of money in the possession of the original holder of money. In this circuit of capital there may be little direct connection of commodity production with human needs being met. This is because the original sum of money, transformed into commodities and then sold for money, is being used to create a larger sum of money at the end. So long as M' > M, this can be considered capital accumulation, and there would appear no reason to end this after one circuit. Rather, it continues on and on, in ever repeated circuits, continuous and self perpetuating. This cycle of capital accumulation can become quite detached from production for use.
Marx defines the difference between M' and M, that is M' – M, as surplus-value (p. 251). Earlier societies had produced a surplus above basic human needs (eg. pyramids and palaces) but the form the surplus takes in a capitalist market system is surplus value (s in later chapters). On p. 252 of the Penguin edition, Marx introduces the term valorization – the self-expansion of money that “converts it into capital.” Marx goes on to describe how this changes things for the possessor of money, the capitalist – “Use-values must therefore never be treated as the immediate aim of the capitalis; nor must the profit on any single transaction. His aim is rather the unceasing movement of profit-making. This boundless drive for enrichment, this passionate chase after 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” (p. 254). Further, Marx compares M – C – M' to birth – “its valorization is therefore self-valorization. By virtue of being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or at least lays golden eggs” (p. 255). Onp. 256, Marx uses a religious analogy.
In chapter 5, Marx show that equivalents must exchange for equivalents in the circuit of capital. That is, there cannot be cheating or exploitation in fully developed market exchange, but commodities equal in value must be exchanged. This leaves the origin of surplus value to be explained. Marx argues that there must be some systematic source of this surplus value, it is not merely the result of cheating, theft, trickery, or speculation. For Marx, surplus-value or profit does not and cannot emerge in exchange or trade, but must emerge in production. In chapter 6, Marx finds the source of the increase in value to be labour and labour power.
Once the circuit of capital, M – C – M', become established, this creates several qualitative changes in commodity exchange.
i. Money becomes Capital. The essential difference between M – C – M' and C – M – C is that money becomes capital, and the new circuit represents the activity of the capitalist. While there seems to be an exchange of equivalents for equivalents, and no one is cheated, a surplus and exploitation emerges.
ii. Self-expanding. This form of exchange is self-expanding and has global implications. This means that capital will continually attempt to expand, looking for new geographic areas to conquer economically, new products to produce and sell, and new ways of organizing production. In contrast to earlier economic and social systems, where change was slow and there was not a strong compulsion to change, capital is active and self-expanding. Markets begin to dominate society and social relations become reorganized by and for market exchange.
iii. Crises and Overproduction. With the M – C – M' form of exchange, the possibility of economic crisis emerges. So long as money circulates in rough relationship with societal needs in simple commodity production, and the aim of production and trade is to produce and distribute use values for consumption, there is unlikely to be an economic crisis caused by exchange. Crises may occur due to famines or natural disasters but production is more or less directly matched with consumption, so there should be not drastic over or under supply. With the M – C – M' form, financial problems can develop. If those with money decide not to return it to another circuit, this can cause economic downturn or depression. Further, the financial sector acquires a life of its own, and commercial and financial disturbances can create bankruptcies and commercial crises. Marx develops an explanation of these in Capital, showing how these crises are a feature unique to capitalism, an aspect of the irrationality of capitalism, causing needless human suffering.
9. Source of surplus-value
Marx showed how surplus value can emerge in the exchange of equivalent values. Marx argues:
Capital cannot therefore arise from circulation, and it is equally impossible for it to arise apart from circulation. It must have its origin both in circulation and not in circulation. ... The transformation of money into capital has to be developed on the basis of the immanent laws of the exchange of commodities, in such a way that the starting-point is the exchange of equivalents. The money-owner, who is as yet only a capitalist in larval form, must buy his commodities at their value, sell than at their value, and yet at the end of the process withdraw more value from circulation than he threw into it at the beginning. His emergence as a butterfly must, and yet must not, take place in the sphere of circulation. (Capital, pp. 268-269).
The trick is to find a commodity that can be bought at its value but in the process of production results in value being expanded. Marx argues that there is such a commodity – the capacity for labour or labour-power.
In order to extract value out of the consumption of a commodity, our friend the money-owner must be lucky enough to find within the sphere of circulation, on the market, a commodity whose use-value possesses the peculiar property of being a source of value, whose actual consumption is therefore an objectification ... of labour, hence a creation of value. The possessor of money does find such a special commodity on the market: the capacity for labour ... in other words labour-power.
We mean by labour-power, or labour-capacity, the aggregate of those mental and physical capabilities existing in the physical form, the living personality, of a human being, capabilities which he sets in motion whenever he produces a use-value of any kind. (Capital, p. 270).
Marx thus finds the source of the surplus value created in M – C – M' to be the exercise of human labour. While this surplus value may ultimately end up being paid to to landlords as rent, or to financiers as interest, the source of surplus value is the surplus labour extracted from workers by capitalists in the process of production.
10. Labour and Labour Power
In order to clarify the manner in which labour is exercised in capitalism, Marx distinguished between labour and labour power. Labour is an activity, the exercise of the worker's abilities and the expenditure of muscle and intellectual power. Labour and the worker are not commodities, in that they cannot be bought and sold. While the labourer can be bought and sold in a slave system, the slave owner still has the problem of obtaining the labour from the slave. In capitalism though, workers cannot be bought and sold, and the exchange takes place in a “free” labour market.
What is bought and sold is the capacity for labour or the ability to labour. This is the commodity Marx calls labour power – with a use value and exchange value. The capitalist buys labour power, agreeing to pay a price to the seller of labour power. This is the exchange value or wage (or value of labour power), and the seller is the worker who agrees to work for a certain time period for the capitalist for the agreed upon wage. As with any commodity, labour power has a use value – its ability to create value. The activity associated with work is labour, that is, the use or exercise of labour power is labour.
What is unique about labour power as a commodity is that the value which labour power is capable of producing can exceed the value of labour power itself. The value of labour power is determined in the same way as the value of any other commodity, that is, the amount of socially necessary labour required to produce it. The capitalist pays this to the worker in exchange for his or her labour power. But the value that can be created by labour power can be much greater, depending on factors such as the intensity of work, the level of productivity and technique, and the length of the working day.
There are certain theoretical conditions which must be met in order for any product to appear as a commodity (i.e. a certain development of the division of labour). In this case, there are preconditions for the purchase and sale of labour power. The potential buyer of labour power must have a sum of money, or capital, with which to purchase labour power. Then there have to be individuals who have labour power to sell, and who wish to sell it. The sale is not one of slavery, so the sale is only for a limited period of time. Marx also notes that those who sell labour power are likely to lack capital, for if they had capital, or other resources on which they could survive, they would not sell their labour power.
There are also historical conditions that have to emerge so that employers can find labour power available, and so a market in labour power develops. Marx calls this the primitive accumulation of capital and describes the process by which the direct producers of products are separated from ownership or possession of the means of production, and where ownership of capital becomes concentrated in the hands of a few (part 8 of Capital, volume I). This primitive accumulation is simultaneously two aspects of the same process. First, it is the process whereby the means of support and independence is taken away from direct producers, and these producers become workers, with no means of support other than the possibility of sale of their own labour power. Producers become free labourers. Second, this is the process whereby the means of production become capital, that is, the land, equipment, building, tools, etc. become owned by a few. Their aim is not to produce useful commodities, but rather to expand the value of this capital. Some ways in which this has occurred is through piracy, enclosures, creation of colonies, etc.
Marx shows that following the primitive accumulation, the process of capital accumulation occurs, through the creation of surplus value. This is invested and reinvested, continually recreating the conditions for the expansion of capital.
11. Value of labour power
Marx argued that the value of labour power is determined in the same way as the value of other commodities, by the amount of socially necessary labour required to produce it.
The value of labour-power is determined, as in the case of every other commodity, by the labour-time necessary for the production, and consequently also the reproduction, of this specific article. In so far is it has value, it represents no more than a definite quantity of the average social labour objectified in it. (p. 274)
This is the cost of subsistence, or a subsistence level wage, for the worker. This must not only be sufficient to enable the worker to survive on a daily basis, but it must also be sufficient for the labour power to be reproduced on a generational basis. This means that the value of labour power includes sufficient commodities to support the worker and at least part of the requirements for supporting the family of the worker.
On a daily basis, this is the cost of the food, clothing and housing for the worker, sufficient to replace the “definite quantity of human muscle, nerve, brain, etc. [that] is expended” (p. 274) in a day's exercise of labour. Physical peculiarities of the country and climate would also need to be considered. Over generations or the longer term, the value of labour power must include the cost of reproduction of workers as a whole – there would have to be sufficient to support the raising of children, support for the family, the cost of some basic education, and a fund for retirement.
For a time, the wage paid for labour could decline below the value of labour power, especially in a period of recession or depression. It is also possible that capitalists may be able to pay immigrant workers, or contract labourers below the value of subsistence. Any time there is an excess supply of labour, above that required by employers, wages can be depressed below the value of labour power.
If capitalism is to survive as an economic and social system, then the wage must either equal or exceed the value of labour power. Marx regarded some of the reform legislation as necessary to improve wages. Working and living conditions had to improve so workers did not become exhausted and die prematurely, and so the supply of labour could be maintained (for example, see section 5 of chapter 10, pp. 375-7). In addition, some capitalists found that there could be greater profits by increasing relative rather than absolute surplus value.
It is possible for wages to rise above the value of labour power for a time, especially when labour is in insufficient supply. Further, over time, there is “a historical and moral element” (p. 275) to the value of labour power.
the number and extent of ... so-called necessary requirements, as also the manner in which they are satisfied, are themselves products of history, and depend therefore to a great extent on the level of civilization attained by a country; in particular they depend on the conditions in which, and consequently on the habits and expectations with which, the class of free workers has been formed. (p. 275)
This means that labour power is a unique commodity in the sense that human needs and the means of meeting these needs become part of the determination of the value of the commodity labour power.
Within the theoretical approach of Marx, there are a number of issues related to the determination of the value of labour power. Some of these are as follows.
a. Historical and moral element. Recognition of the moral and historical element of the value of labour power raises several problems concerning the nature of needs, how needs are formed, how these change over time, and what element of surplus value may be captured by workers, or at least by some workers. Lenin later referred to the aristocracy of labour, and certainly a segment of well paid workers would sometimes seem to be able to obtain a share of surplus value. And in North America today, wages are much above the level of subsistence, at least when compared with poorer countries.
b. Skilled labour. The value of labour power may also be high for some workers because they are skilled workers, whose training may take considerable time and resources. Marx considers the value of labour power for these workers to be a multiple of the value of labour power of unskilled labour, or like simple labour intensified. This is similar to the human capital model of economics.
c. Production and reproduction in non-capitalist institutions. One further problem associated with the value of labour power is that unlike commodities produced by industry, labour power as a commodity is not freely reproducible by capitalist production processes. In fact, its production is outside the capitalist system, produced by families, where competition and the direct rule and organization of capital is not present. It is thus questionable whether its value can be determined in the same way as that of other commodities. Labour power could be either over or under supplied, and there would appear to be no mechanism to adjust the supply of and demand for labour, as there is with other commodities – Marx later introduces the reserve army of labour (the unemployed and non labour force) as an adjustment mechanism.
d. Unpaid labour of women. A feminist critique of Marx's view of the value of labour power is that considerable unpaid labour of women, children, and other household members may go into production of labour power. This is not regulated by the market, so is highly variable in quantity and quality. It is not recognized socially, at least not through the market. In addition, this labour may be exercised within a patriarchal system – that of the family.
e. Industrial reserve army of labour. For Marx, the regulating mechanism that keeps the wage at the value of labour power was the industrial reserve army of labour (chapter 25, section 3, pp. 781-794). Marx noted that capitalism creates a large supply of unemployed workers, ready and willing to work, but without jobs. This labour reserve expands as unemployment increases due to bankruptcies and economic crises, and as there is greater natural population growth and immigration. It would contract if the birth rate fell, if there was emigration, or as business picked up in the expansion phase of the economic cycle.
The industrial reserve army of labour is always created and recreated through the economic cycle. As economic expansion occurs, the reserves of good quality workers begin to be depleted, and wages rise. This rise of wages may threaten profits, thus helping to trigger an economic downturn. As profits decline and bankruptcies increase, the reserves of unemployed labour are replenished, driving down wages. This helps recreate the conditions for profitable economic expansion, and a new cycle occurs.
Further, technological change and competition create unemployment, as more efficient methods are found to carry on production. Some employers use less labour power and this is a factor which helps maintain a large and continually growing industrial reserve army of labour. Marx's outlook for capitalism was of gradually declining wages and growing unemployment.
f. Conclusion. The above considerations show that there are some theoretical and practical problems with Marx's analysis of the value of labour power. The major problem is that Marx is attempting to apply an economic model of the value of labour power to a commodity which is produced in non-capitalist conditions. It might make more sense to build a separate model of the family and household, recognizing that the family and household are strongly affected by capitalist economic and social relationships but that there are other forms of social relationships within these institutions.
12. Surplus value
The M – C – M' circuit of capital initially emerged as merchant capital, with merchants and traders purchasing commodities at low prices in one area and selling them in a different market at higher price. The labour required to produce a product in one area may be less than that required in another – eg. producing spices in India requires relatively little labour and producing furs in northern Europe may have required relatively little labour – thus a trader may have been able to exchange these two products and make a profit. The different conditions of production in different regions and the separation of markets because of limited transportation and communication created this possibility. Of course, unequal exchange through tough bargaininig or cheating also occurred. But as trade, markets, and competition develop, these possibilities are reduced and capitalists seek new ways to develop surplus value. There are severe limits to the possibilities of such profit for merchant or trading capital and some involved in these began to consider how they control and change production and the labour process to produce surplus value or profit.
Thus, once capital develops to a certain stage, M – C – M' on the basis of trade and exchange alone is no longer sufficient.
Traders may not initially have been concerned about what type of commodities are traded and how they are produced. That is, they initially were not too concerned about how C was produced in M – C – M'. Within this circuit though, labour (L) is involved and this could be pictured as
M – C – M'
That is, the labour of peasants and artisans created commodities, and the labour process was not really part of the circuit of capital. Rather, the exercise of labour occurred in traditional forms outside the circuit of capital and capitalists merely purchased the products of labour for later resale. This could be characteristic of a system of merchant capitalism.
But once capital becomes involved in organizing production itself, the circuit of capital can be pictured :
M – C C' – M' M' > M and M' – M forms profit, interest, rent
That is, industrial capital and capitalists are involved in the process of production of commodities. They use money to purchase commodities in the form of means of production (MP) such as raw materials and buildings, and also labour power (LP). These are used in production to create finished commodities which can be sold for a sum M' that exceeds the initial investment of capital, M. The capitalist organization of production begins to alter conditions of production in order to increase surplus-value and profit. It is in the consumption of labour power, and the exercise of labour, in this expanded circuit that Marx finds the origin of surplus value, which is then the source of profit, rent, and interest in a well developed industrial capitalism.
13. Sources of surplus value
a. The Production Process.
In order to analyze the production or labour process, Marx defines some new concepts. MP stands for the means of production, and this is turn is composed of the objects of labour and the instruments of labour. The objects of labour (p. 284) are comprised of the objects or materials that labour works on, transforming them into commodities. These are the products of nature – land, water, and resources – including the objects that have “been filtered through previous labour” (p. 284) that we consider to be “raw materials.” The land and other products of nature that are objects of labour are inputs to the production process, and may be materials directly from nature, or they may may have previously been worked on by human labour to transform them into inputs suitable for the labour process in question. The instruments of labour (p. 285) are the things “which the worker interposes between himself and the object of his labour” (p. 285), that is the tools, machinery, buildings, roads, canals, railroads, and today’s telecommunications infrastructure. These are instruments that workers use when working on the objects of labour to produce goods and services.
In terms of exchange values, no new exchange value comes from the constant capital/dead labour/means of production. This is an important point in distinguishing Marx's labour theory of value from earlier value theories. Smith and Ricardo argued that capital created value, and that capital deserved profit in relation to the amount of capital employed. Economists generally have considered capital to be productive in the same sense. But Marx argued that all the new value created in the production process was created by labour, by the purchase and use of labour power. No extra or new value is created in the production process by constant capital.
b. Surplus value
In the second section of chapter 7, Marx analyzes the valorization process – the self-expansion of capital through the creation of surplus-value. The surplus-value emerges in the production process (using means of production and labour power) because of the difference between the value of labour-power and the value that the exercise of this labour can produce. “The past labour embodied in the labour-power and the living labour it can perform, and the daily cost of maintaining labour-power and its daily expenditure in work, are two totally different things” (p. 300) and “the owner of the money has paid the value of a day’s labour-power; he therefore has the use of it for a day, a day’s labour belongs to him” (p. 301). While the worker has been paid the value of his or her labour power, the employer can use the labour for a longer period, thus creating more value. Thus, all surplus value is created by the use of this labour power in conjunction with the means of production.
In chapter 8, Marx examines the difference between constant and variable capital and the manner in which the employment of these result in surplus value. The capitalist production process begins with a sum of money, or capital (C) which is used by the capitalist to purchase commodities. These commodities are (i) the means of production, the tools, machinery, buildings, and raw materials that are purchased with constant capital, the total value of which is c; (ii) the labour power, purchased with variable capital, or v. The amount spent by the capitalist on variable capital is the wage bill for hiring workers. The production process takes place as the workers' labour power is used to transform the constant capital and variable capital into commodities. The value of the commodities produced exceeds the value of the commodities (means of production and labour power) purchased by the capitalist. The manner in which this original value is expanded is by obtaining more labour from the worker than the amount expended on wages. The following equations and diagram illustrate this.
Beginning capital is C = c + v
6 hours 6 hours
Necessary labour Surplus labour
Cost = v = wage Surplus value = s
Resulting capital is C’ = c + v + s > C
Rate of surplus value = s/v = 6/6 = 1
In this model, it costs v to pay workers the value of their labour power, and workers can produce enough commodities in six hours to meet the wage bill of v. But workers are employed for 12 hours, giving the capitalist the use of their labour power for 12 hours. But it takes only 6 hours labour for a worker to produce an amount of commodities of value sufficient to pay for the wage, or the value of labour power purchased. The worker works another 6 hours producing commodities, but the products of these other six hours are the property of the capitalist. The capitalist sells these commodities for an amount s, representing the surplus value produced by the worker but appropriated by the capitalist. Workers have no choice but to work these extra hours since they have no capital of their own; if they do not perform this work, they are tossed back into the industrial reserve army of unemployed workers.
The rate of surplus value is thus s/v, and this is also the “degree of exploitation” (p. 326). This can be expressed in various ways:
s/v = surplus labour / necessary labour = value of surplus commod / wages
c. Absolute Surplus Value
Given this situation, the rate of surplus value is s/v, and the only way that capitalists can increase this is to increase the amount of surplus labour time. That is, if wage rates are fixed, that is, the value of labour power is unchanged, the only method the capitalist can use in the process of production is to extend the working day. Marx discusses the limits to this in the first section of chapter 10. He notes that the minimum time that can be devoted to s is zero (p. 341) and the maximum is twenty-four hours. But that is limited by the “physical limite to labour-power” and “moral obstacles” so that “the length of the working day therefore fluctuates within boundaries both physical and social.” (p. 341)
Marx notes that limits to the length of the working day are flexible, so that working hours differ by time and place. At the same time, in the remaining sections of chapter 10, Marx provides examples of the “voracious appetite for surplus labour” (p. 344) where all potential workers are pressed into wage labour and, once established, long working days become the rule in all branches of industry.
If the industrial reserve army of labour is large, capitalists may be able to extend the length of the working day, but this is the only real way to expand surplus value, the source of profit. Marx calls this absolute surplus value. However, there are obvious limits to this. Alternatively, the capitalist might try to find labour power of lower value, such as the labour of children, or prison labour. Population growth or immigration might also help. Finally, enlarging the scale of operation might not increase the rate of surplus value for any one worker, or the profit rate, but it will help expand the total amount of profits that accrues to the owner of capital (concentration of capital).
In section 7 of chapter 10, Marx notes how legislation may be necessary to improve the condition of the worker since “the worker as ‘free’ seller of his labour-power, succumbs without resistance once capitalist production has reached a certain stage of maturity” (p. 412). Marx also argues that the length of the working day and other working conditions are a result of struggles between workers and capitalists: “The establishment of a normal working day is therefore the product of a protracted and more or less concealed civil war between the capitalist class and the working class” (pp. 412-3). Also note the comment that in the United States “every independent workers’ movement was paralysed as long as slavery disfigured a part of the republic. Labour in a white skin cannot emancipate itself where it is branded as a black skin.” (p. 414) Finally, Marx argues that individually workers cannot accomplish much, but must band together “the workers have to put their heads together and, as a class, complet the passing of a law” (p. 416). These comments demonstrate that while Marx remained a revolutionary, he also recognized the importance of social reform within capitalist societies.
In his discussion of the effects of machinery and large-scale industry (chapter 15, section 3) Marx describes how machinery prolongs the working day and “permits an expansion of the scale of production without any change in the amount of capital invested in machinery and buildings. Not only does surplus-value increase therefore, but the outlay necessary to obtain it diminishes.” (p. 529)
d. Relative surplus value
Given the limits to the working day and the strength of the working class and legislation, capitalists have another means of increasing surplus value and the degree of exploitation. This is to increase the ratio s/v by shortening the period of necessary labour, thereby increasing the time devoted to surplus labour (assuming no change in the length of the working day). If this can be done, it may even be possible to increase s/v even when the length of the working day is reduced, so that surplus labour time is reduced and less time is devoted to production of surplus commodities.
Marx calls this relative surplus value; “I call that surplus-value which arises rom the curtailment of the necessary labour-time, and from the corresponding alteration in the respective lengths of the two components of the working day, relative surplus value.” (p. 432). Historically, this has proved to be the most common method for expanding surplus value. This can be illustrated by comparing the following diagram of the working day with the previous diagram.
4 hours 8 hours
Necessary labour Surplus labour
Cost = v Surplus value = s
Rate of surplus value = s/v = 8/4 = 2
As can be seen, the rate of surplus value can be doubled if there is a small decline in the cost of variable capital. In this example, even if surplus labour were to be cut to 6 hours, there would still be a rate of surplus value of s/v = 6/4 = 1.5.
There are several ways to do this. For example, workers could be paid less than the value of their labour power (p. 431), and for some periods (depression, war, legislative limits on wages) and with some types of workers (immigrants, contract workers) this can be done. While some capitalists will always attempt to do this, it is not a self-generating or permanent process. Rather, there are two major methods of expanding relative surplus value: (a) developments that lower the value of labour power or the cost of subsistence, and (b) reorganization of work within production and the circulation of capital.
i. Reduce v
If it is possible to reduce the value of labour power, then v can be reduced. This can occur if food, shelter, and clothing can be produced with less labour so the cost of workers’ subsistence declines. Then the wage bill declines and capitalists need not devote spend as much capital to variable capital, while maintaining the production of surplus value. Marx notes
In order to make the value of labour-power go down, the rise in the productivity of labour must seize on those branches of industry whose products determine the value of labour-power, and consequently either belong to the category of normal means of subsistence, or are capable of replacing them. (p. 432)
Historically, the development of agriculture, cheaper food imports, free trade, the development of mass textile production, the breaking of the monopoly power of the gilds and trading companies, and improvements in transportation all played a role in Britain's efforts to cheapen the cost of workers' subsistence. Colonialism, the use of force and slavery also played an important role in providing cheap food or cheap inputs to British industry. Note Marx’s comment about how much of this is not deliberate, but an unintended consequence, similar to Smith’s invisible hand:
When an individual capitalist cheapens shirts, for instance, by increasing the productivity of labour, he by no means necessarily aims to reduce the value of labour-power and shorten necessary labour-time in proportion to this. But he contributes towards increasing the general rate of surplus-value only in so far as he ultimately contributes to this result. (p. 433)
In his discussion of the effects of machinery and large-scale industry (chapter 15, section 3) Marx describes how the employment of women and children is expanded and “machinery, by throwing every member of that family onto the labour-market, spreads the value of the man’s labour-power over his whole family. It thus depreciates it” (p. 518).
b. Increased intensity of work and reorganization of production
This method has a more direct impact on the conditions of work. There are many ways of reorganizing work, so the amount of labour required is reduced; each such reorganization aims to reduce v while maintaining s. The result is to increase the rate of surplus value, s/v, thus increasing profits.
In the labour and production process, the amount of idle time can be reduced, or the intensity of the work can be increased by running machines faster or forcing workers to do more operations per unit of time. The setup and organization of the work may be changed so that less labour time is involved in producing the object, as in Taylorism and scientific management. The division of labour and technical change may proceed to do the same.
Marx describes the power of machinery and factory production in intensifying labour (chapter 15, section 3, part c, pp. 533-553). In fact, it was the shortening of work hours through legislation that led
to the development of productivity and the more economic use of the conditions of production. It imposes on the worker an increased expenditure of labour within a time which remains constant, a heightened tension of labour-power, and a closer filling-up of the pores of the working day, i.e. a condensation of labour … the denser hour of the 10-hour working day contains more labour (p. 534).
This is associated with “strictest discipline” (p. 535) and “the speed of the machines is increased, and the same worker receives a greater quantity of machinery to supervise or operate” (p. 536). Marx also notes that this may reduce the quality of the product (p. 537). With factory production there is “a tendency to equalize and reduce to an identical level every kind of work that has to be done by the minders of machines” (p. 545) – an actual development of abstract or homogeneous human labour. This also means that “the working personnel can continually be replaced without any interruption in the labour process” (p. 546) since workers are raised to work with machines and since machines, dominate the structure and speed of the production process.
Near the end of this section on the factory (chapter 15, section 4), Marx describes how workers almost become part of the machine (p. 547) and “factory work exhausts the nervous system to the uttermost; at the same time, it does away with the many-sided play of the muscles, and confiscates every atom of freedom, both in bodily and intellectual activity. … deprives the work itself of all content” (p. 548). This appears to be a further development of Marx’s earlier views on alienation. He discussed the was in which workers’ skills are degraded (p. 549) and how there are what we would today call poor occupational health conditions in factories (p. 552).
14. Summary and implications
a. Theory of value
Marx’s theory of value as discussed in these notes comes primarily from the first twelve chapters of Capital, volume I. In most of the remaining chapters of volume I, Marx traces these developments and their implications for workers, society, and economy in early British capitalism. The development of machinery and large scale industry resulted in great expansion of relative surplus value and capital accumulation.
The theory of value is further examine in volumes II and III of Capital. Values are transformed into prices, so that prices and values, while connected, can also diverge considerably, especially under non-competitive conditions . The value of labour power is transformed into wages, with the latter depending not only on the value of labour power, but also on class struggle, legislation and state regulation, and the moral and historical element. Surplus value becomes the property of capital, and forms the basis for profits. However, it also is the ultimate basis for interest and rent as well, especially as financial capital develops, and as landed property increasingly becomes capital.
Several reasons for examining Marx’s theory of value in detail are as follows.
i. Formal model. The Marxian theory of value is a prime example of the theoretical frameworks diagram examined at the beginning of the semester. Marx uses an historical-theoretical method to develop concepts such as value, labour power, and relative surplus value. These are combined into statements and propositions which connect together into formats and a formal model of how values are created and expand and how capital accumulation develops. Marx developed the model by moving back and forth between the study of history and the economy and society he observed around him, testing the model by examining how actual conditions in British society matched the theoretical model. There are also policy implications (legislation, trade unions) and the effects of such policies on subsequent economic developments are also part of the model.
Another aspect of the model is the working out of enlightenment thought – with use of reason, logic, and theory, but also carrying out careful observation of the social and economic world. Finally, many of the ideas of the early Marx, in terms of importance of history, dialectical reasoning, and materialist analysis of private property, labour processes, alienation, and social relationships are contained in this theory. That is, the ideas of the early Marx are further developed and worked out, taking a more political economic different direction than the early analysis. But there appears to be great continuity in Marx’s writings, with his analysis about the ways labour is deformed in capitalism and how capitalism is powerful and expansive, but also causes great human suffering and dominates workers and society.
ii. Applications. Marx’s value theory is often regarded as incorrect or outmoded, in that it does not provide an adequate explanation of prices and other trends in present day capitalism. While it may have these deficiencies, it provides useful ways to look at markets and their power and dominance and the expansive power of capital accumulation. It is also a useful way of considering how value develops in production – through the use of human labour. The struggle between capital and labour over the length of the working day, the intensity of labour, and wages, along with the voracious search for new sources of cheap labour power, are all current economic and social issues. Some of the other implications of the model are examined in the next section of these notes.
b. Struggle over Surplus Value. Since the labour-capital relation is a contradictory one, there are inevitably struggles over how much surplus value is produced, and who obtains the surplus value.
i. The Working Day. The fights over the length of the working day, the intensity of work, how work is organized, all affect the amount and division of surplus value. Workers resist attempts to carry out speedup, make work more intensive, or remove control over conditions of work. Employers and capitalists attempt to make such changes.
ii. Trade Unions may be able to bargain back some of the surplus value that would otherwise be extracted from workers. By combining together, workers may be able to prevent some surplus from being created (limiting hours of work) or obtain higher wages through effective collective bargaining. Those workers that are able to do this may reduce the surplus going to capital. On the other hand, capitalists may be able to reorganize production so that these workers are more productive, and capitalists continue to make profits while workers are more highly paid. In fact, the rate of exploitation could be greater for the more highly paid workers.
c. Transformation. Capital, Volume 1 examines simple commodity production, the expansion of markets, the development of a monetary system, the growth of manufacturing and the development of a full blown system of capitalism. Marx shows how exchange value and surplus value are created and expanded.
In Volume 3, Marx shows how values are transformed into prices. Exchange takes place at the value of the product under a system of simple commodity production. But once markets and competition develop, capital goes to the most profitable endeavours. Labour is mobile, people must move to different types of jobs, with unskilled jobs growing in number. In addition, technical progress takes place, with machine production and more use of capital replacing human labour. Finally, monopolies may develop in some areas.
For these reasons, products may no longer exchange at their values, but at their price of production. Volume 3 examines this transformation of values into prices, and surplus value into profits, interest and rent. Marx attempts to show how the labour theory of value can be made to explain prices. This transformation of values to prices had been analyzed by many economists, and remains a controversial feature of Marx's economics.
The essential point concerning the transformation issue and fully developed capitalism is that it is still labour that creates value, and the exploitation of labour that produces surplus value. Underlying prices and exchange are the values created by human labour. Capitalists, landlords and financiers may expropriate this surplus value as profit, rent and interest, respectively, but the value is ultimately created by human labour. One of the main aspects of history is the struggle concerning control over this surplus value.
d. Contradictions. Throughout Capital and his other writings, Marx always examines the contradictory nature of the capitalist economic system. Some of the contradictions are as follows.
i. Profit not human needs. While capital accumulation vastly expands production, markets, use values, and wealth, the use values may be only very distantly related to actual human needs. This may be because of the maldistribution of wealth, so that basic necessities are not available to some while luxury goods are available to the wealthy. Or there may be a gap between “wants” and “needs” – with wants being created by capital through marketing (commodity fetishism) and product obsolescence. The main critique Marx had of capitalism as an economic system is that it creates the productive potential to meet human needs, but it is driven by the search for profits, so that human needs are not met.
ii. Falling Rate of Profit. There is a tendency for the rate of profit to fall as capitalism develops. Ricardo had noticed this earlier. As a result, there are tendencies toward stagnation in the economic system. This was evident in the 1930s and may be the case over the last 15-20 years. To find a way out, capitalism attempts to increase the productivity of labour, find cheaper raw materials, increase the rate of exploitation (reduce the value of labour power), promote technological advance, start wars, etc. These may overcome the tendency for a period of time, but the tendency for the rate of profit to decline will then reassert itself.
Marx’s argument about the falling rate of profit can be illustrated as follows. If an amount of capital C is used in production to purchase constant capital (c) and variable capital (v), and resulting in surplus value (s), then the rate of profit is the amount of s divided by the quantity of capital invested.
Marx argues that there is a process of increasing “organic composition of capital” as capitalism develops. By this, Marx means that as machine and factory production expand, machines replace workers so that the ratio c/v increases. But if the rate of surplus value (s/v) does not expand, then the rate of profit will decline. That is, in increase in c/v increases the denominator while the numerator (s/v) does not change, thus lowering the rate of profit. In chapter 25, section 2, Marx notes
the growing extent of the means of produciton, as compared with the labour-power incorporated into them, is an expression of the growing productivity of labour. The increase of the latter appears, therefore, in the diminution of the mass of labour in proportion to the mass of means of production moved by it. … this change in the technical composition of capital, this growth in the mass of the means of production, as compared with the mass of the labour-power that vivifies them, is reflected in its value composition by the increase of the constant constituent of capital at the expense of its variable constituent. (p. 773)
The reason this occurs is that only living human labour produces new value or surplus value and, with relatively less human labour involved in the production process, there is not as much self-expansion of capital in this process. This is one of the contradictory processes of capitalism in that capital accumulation requires use of more machinery and constant capital (machines, factories, transportation, telecommunications) and capital accumulation is characterized by ever greater amounts of means of production or constant capital. While this raises “the productive power of labour, it is clear that it attains this result only by diminishing the number of workers employed by a given amount of capital” (p. 531). Further, “it is impossible, for instance, to squeeze as much surplus-value out of two as out of twenty-four workers” (p. 531). Thus
there is an immanent contradiction in the application of machinery to the production of surplus-value, since, of the tow factors of the surplus-value created by a given amount of capital, one, the rate of surplus-value, cannot be increased except by diminishing the other, the number of workers. (p. 531)
In chapter 15, section 3 (b), Marx notes how capitalists respond – lengthening the working day or increasing the intensity of labour – in an attempt to maintain or increase profits. That is, they attempt to increase s/v in the form of absolute or relative surplus value. At this point in Capital, Marx does not expand further on this contradiction, but leaves its analysis to volume III.
While this tendency to the falling rate of profit is always present, there are countertendencies, and one of these is noted in the same section. That is, it may be possible to produce the same constant capital (c) with less labour. Recall that it is the socially necessary labour required to produce a commodity that determines it value. Marx notes that machines undergo what he calls “moral depreciation” (p. 528). That is, the value of a machine “loses exchange-value, either because machines of the same sort are produced more cheaply than it was, or because better machines are entering into competition with it” (p. 528). That is, the value of the machine is not how much labour it required to produce it, but “by the labour-time necessary to reproduce either it or the better machine” (p. 528).
Historically, there are tendencies in both directions. While there is a tendency to a declining rate of profit, capital continues to expand as it finds new sources of cheap labour (reduce cost of v while maintaining s), increasing rates of exploitation (raise s/v), and finding ways to reduce the value of constant capital (c). In recent history, after the second world war the widespread use of cheap petroleum products helped reduce the value of constant capital. More recently, the widespread development and adoption of computer technologies has allowed for the reduction in c – although the reduction in living labour may also make it more difficult to increase surplus value.
iii. Periodic Crises. Overproduction periodically results in a system characterized by the circuit M – C – M'. This circuit continues as capital accumulation so long as M' > M, so that there is no necessary short run relationship of production to potential sales and this produces recession, depression, expansion, and boom. That is, during a period of economic expansion, production expands so long as there are expectations of more sales. But the purchasing power of capitalists and workers ultimately becomes insufficient to absorb all these products, sales begin to level off, and some companies cut back on production. Some goods have been overproduced at this point, not all payments can be met, and bankruptcies of companies begin. This produces sharper cutbacks in production, workers are laid off, and a recession or depression sets in. These periodic downturns are a regulating mechanism for capitalist and capital, bringing prices back in line with values and restoring some equilibrium. But they cause great human suffering, they are inevitable, occur regularly, and are irrational, destroying capital and people.
iv. Pauperization. A large reserve army of unemployed workers is necessary for capitalism to operate. In addition, capitalism uses up people and discards them. This results in a growing class of poor people, as well as helping to keep down the wage level of the working class.
v. Concentration and centralization. These are both tendencies implicit in the accumulation of capital – Marx describes these in chapter 25, section 2, p. 777.
Concentration initially is identical with the accumulation of capital, turning more of the productive apparatus into a capitalist form, and expanding the size of the capital. This takes place capital within particular spheres of production, as the M – C – M' form takes over more production. At the level of capitalist organization as a whole, capital expands and incorporates more and more of the world into its orbit. Marx also notes that it is a reorganization of capital “concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into a few large capitals” (p. 777).
Centralization refers to the increased oligopoly and monopoly that result from takeovers, mergers and bankruptcies. Increased proportions of the total capital come under the control of a single capitalist – “capital grows to a huge mass in a single hand in one place” (p. 777).
The contradiction here is between competition on the one side, and concentration and centralization on the other side. Both tendencies exist, and much of the progressive side of capitalism emerges from concentration. But capital also has the tendency to form monopolies, thus undercutting competition.
vi. Socialism. The ultimate contradiction is that the system is unstable, producing its own gravediggers, the workers. The accumulation of capital and the expansion of the capitalist form of organization produces a working class that can abolish the system. The proletariat is the means by which private property will be abolished, and a new system that can socialize the means of production, be created. This will help create the conditions where communism can be developed.
15. Other issues
Marx analyzes this in chapter 13, where he notes that capitalist production proper is large scale production, with many labourers grouped together working with a large amount of constant capital. While capitalist forms of production may emerge earlier, as small capital in separated and isolated branches of production, the true starting point for capitalist production, “both historically and conceptually” (p. 439) is when “ a large number of workers working together, at the same time, in one place … in order to produce the same sort of commodity under the command of the same capitalist” (p. 439). Marx notes that this is merely a quantitative difference at first, but once a certain stage of growth of this process occurs, there is a qualitative difference.
One change is that labour becomes “labour of an average social quality” (p. 440) – the abstract or homogeneous human labour begins to appear. It is more interchangeable, of similar quality, and it is this change in level of production and markets that produces this average labour. Note the reference to the statistical idea of average and “errors” on p. 440.
A second difference is that the workplace itself is transformed into a place and process whereby “a portion of the means of production, are now consumed jointly in the labour process” (p. 441). That is, the production process is no longer just individual workers using raw materials, as might have occurred in the putting out system. Rather, the objects and instruments of labour “are used in common” (p. 442). For the capitalist-employer, this results in some economies and increases the productivity of labour; this reduces the average labour time required to produce commodities, is more efficient, and results in lower cost commodities.
In terms of what this means for workers and society, “this form of labour is called cooperation” and results in “the creation of a new productive power, which is intrinsically a collective one” (p. 443). While capitalism may seem to be an individualistic, competitive system, Marx notes how cooperative it is an economic system, in that workers and capitalists come together to expand production, productivity, and the accumulation of capital, thereby creating a more productive, cooperative system for production of commodities.
Further, Marx notes how this is accomplished under the direction and coordination of capitalists, with new forms of organization emerging. He notes that there will be managers and supervisors – “an industrial army of workers under the command of a capitalist requires, like a real army, officers (managers) and N.C.O.s (foremen, overseers) who command during the labour process in the name of capital” (p. 450). This foreshadows the major structural changes in business organization in the twentieth century, where large corporations with various strata of managers and various divisions emerged.
Finally, Marx notes how this new productive power “appears as a power which capital possesses by its nature – a productive power inherent in capital” (p. 451) when, in fact, this is the “socially productive power of labour” but is “a free gift to capital.” (p. 451) This is analogous to commodity fetishism in that the socially productive power of labour appears not as value created by social, cooperative, human labour but by capital, thus masking the essential relationship.
b. Simple and expanded reproduction
In part seven of Capital, volume I, Marx examines the process of the accumulation of capital. For the most part, the earlier analysis in Capital dealt with how value and surplus value are produced in the production process – this applies primarily to the way that production is organized within particular firms and branches of industry. In part seven, the emphasis shifts to analysis of capital accumulation within society as a whole. Here Marx examines the process of reproduction of capital, labour, and the capital-labour relationship, along with the original or primitive accumulation of capital and continued accumulation. As noted on pp. 709-10, Marx abstracts from several features of the complete economic system – prices of produciton, profits, interest, gains from trade, and rent (to be examined in volume III) – but examines capital accumulation from the view of the economy as a whole.
Simple reproduction is the process of capitalist production on a continuous basis, maintaining production at the same level – the process of replacing what was used up and maintaining and creating the conditions for continued production. This process exists in all societies, so “the society can reproduce or maintain its wealth” (p. 711). In a capitalist society, the value of the constant and variable capital, productively consumed in the process of production, must be replaced. In addition, since this is a circuit of capital, there needs to be a definite quantity of surplus value produced – if this is to be a form of production exactly reproducing itself in value, this surplus value is consumed by capitalists, rather than reinvested in production to accumulate capital (p. 712). This ideal and artificial model, whereby production maintains itself at the same level in period after period, allows Marx to identify several features of economic and social relationships in capitalism.
First, Marx notes how more and more production occurs under the dominance of capital. Regardless of the origin of money that is used to employ workers and produce surplus value, “simple reproduction, brings about other remarkable transformations which seize hold of not only the variable, but the total capital” (p. 714). That is, all money employed as capital becomes capital and “converts all capital into accumulated capital, or capitalized surplus-value” (p. 715). This means that it is no longer just a sum of money that is the owner’s personal property, but is a product of “value appropriated without its equivalent” (p. 715). It acquires a social and exploitative character, since is reproduced with by “the unpaid labour of others” (p. 715).
Second, simple reproduction is sufficient to demonstrate that the capitalist production process is “the production and reproduction of the capitalist’s indispensable means of production: the worker” (p. 718). This means that the “capitalist produces the worker as a wage-labourer” (p. 716) so that simple reproduction is also reproduction of the capital-labour social relationship. Since more and more of society is involved in this form of production, this means an extension of this basic social relationship in a capitalist society. Marx summarizes this in the last sentence of chapter 23, noting how this process reproduces the capital-labour relationship, the capitalist, and the worker.
In chapter 24, Marx moves beyond simple reproduction, so that surplus value is not consumed but is itself employed as extra capital, thus producing an expansion of capital at each stage, or capital accumulation and self-expansion of capital. This is sometimes referred to as expanded or extended reproduction. Marx then moves on to examine this process of capital accumulation in chapters 25 through 33. In particular, he is concerned with the way in which this accumulation affects the proletariat. In volumes II and III, Marx devotes more attention to capital and economic conditions.
c. Industrial reserve army of labour
Marx introduces the concept of the industrial reserve army earlier in volume I but develops a more complete analysis in sections 3 and 4 of chapter 25. He refers to this as a relative surplus population and argues that this surplus population increases as capital accumulates. Perhaps because Malthus considered there to be laws of population, Marx develops a model of laws of population, noting that “this is a law of population peculiar to the capitalist mode of production” (pp. 784-5). While Malthus considered his law of population (population grows faster than the means of subsistence) to apply regardless of mode of production, Marx argues that “every particular historical mode of production has its own special laws of population” (p. 784).
In terms of the long-term trend, Marx notes that since the trend is to increase the constant capital at the expense of variable capital, and since the latter determines the demand for labour, “capitalist accumulation … constantly produces … a relatively redundant working population” (p. 782). The capitalist form of production expands and creates a greater demand for workers. But this expansion of the capitalist form also results in more workers coming into the labour market; the long term trend is one whereby a progressively increased unemployed group of workers results.
A second form of the industrial reserve army is that it expands and contracts over the course of the economic cycle. For example, when there is economic expansion, “there must be the possibility of suddenly throwing great masses of men into the decisive areas without doing any damage to the scale of production in other spheres. The surplus population supplies these masses.” (p. 785) But at other times, the accumulation process “constantly sets free a part of the working class” (p. 786). Thus the reserve army contracts as economic expansion occurs and expands as economic decline takes place. This produces cycles of employment and unemployment for workers and wages expand and contract in proportion to the size of the industrial reserve army (pp. 790-1). This process does not threaten capital accumulation, since a reduction in the reserve army produces forces that renew this reserve.
In section 4, Marx describes the composition of the industrial reserve army – the floating, latent, and stagnant portions.
d. Primitive accumulation
Bottomore, Tom, ed., A Dictionary of Marxist Thought. Cambridge, Massachusetts, Harvard University Press, 1983
Hadden, R. W., Sociological Theory: An Introduction to the Classical Tradition, Peterborough, Broadview Press, 1997.
Mandel, Ernest, “Introduction” in Marx, 1976.
Marx, Karl, Capital: A Critique of Political Economy, Volume 1, Harmondsworth, Penguin Books, 1976.
Roll, Eric, A History of Economic Thought, Englewood Cliffs, Prentice-Hall, 1956
Last edited October 4, 2002
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