(The Spark, November 2008)
With the financial turmoil dominating the news over the last two months, commentators are talking about the end of the free market. Some panicked commentators have even questioned the survival of capitalism itself. With capitalism in a state of panic and all sorts of people in the media suddenly talking about Marx, it does seem to be a good time to look at what Marx had to say about capitalism that made his ideas so resilient.
What concerned Marx was the fact that while there were a lot of critics of capitalism active in his day, there had been no scientific analysis of how capitalism worked, so socialist projects were idealist and unable to gain much traction. Marx decided to start at the most basic level of economic production, the commodity, to discover how and why capitalism seemed to be so productive yet also so prone to crisis.
Picking up where earlier political economists had left off, Marx showed that the key to understanding the economy was the production of commodities - goods or services produced for sale. The one thing that all commodities have in common is human labour. Assuming people work at an average pace (which Marx called “socially necessary labour time”), eight hours of shoemaking is equivalent to eight hours of farming or eight hours of weaving. If I work for eight hours making shoes, I can buy goods to the value of eight hours’ labour (using a special commodity - money). If those goods are enough to feed and clothe me, I will do that labour every day to replace my used-up labour power.
For the economy to work overall, commodities must be exchanged at (or close to) their equivalent value in labour time. “Price” serves as a crude approximation of this. Otherwise one group of producers would be getting ripped off. This can happen sometimes but not overall, because capitalists simply reinvest in another sector of the economy if their own makes insufficient profit.
What Marx discovered was the significance of labour power itself as a commodity. Unlike all other commodities, which only transmit their value, labour power can create new value, beyond what it needs to replace it. With the advantage of tools and machinery, I might produce enough value to meet my needs in only four hours. But the boss makes an “equal” exchange. He doesn’t exchange a day’s pay for the labour needed to produce that value in the form of pay, but a day’s pay for a whole day’s work, even if my labour power is so productive that I can produce the value of my wage in four hours. The extra hours of work are “surplus” labour.
In older systems like feudalism, it is obvious that making a peasant work on the lord’s land, or simply claiming a right to some of the production, is exploitation. The exploitation is still there in capitalism; in fact it’s much greater - it’s just hidden within the wage system. We get paid an hourly rate for every hour we work: no more, no less. What could be fairer than that? The problem is that even if we negotiate a good pay rate, it will never equal the actual value of the work we do. If it did, the capitalist would have no need for us, because we wouldn’t be generating a profit.
So production in capitalism occurs not because people need things, which is reduced to a means to an end, but because it makes a profit. When the profit dries up, the capitalist moves on, no matter how important the production might be for society.