Chapter Four

Karl Marx : 

Karl Marx Economic Analysis – Chapter 4

Economic Analyses: 

Economic Analyses Marx’s theories of economy and society are presented primarily in Das Kapital , which may believe to be Mars’s most important writing, and which also continues to have influence on sociology and economics

Base and Superstructure: 

Base and Superstructure Marx’s notion of “productive forces” include raw materials, machinery and technology, and the skill and strength of human labor as they are materially necessary for production Excluded are those associated elements that may encourage or support production, but are not intrinsically required

Base and Superstructure: 

Base and Superstructure The productive forces do not become truly economic categories until they are socially organized; the key feature of that organization entails their ownership, or effective control. Marx contended that people become productive forces when their work is socially organized; and the key feature of that organization is reflected by whether they work independently of each other, are enslaved, kept as serfs, employed as wage-labor, or the like

Base and Superstructure: 

Base and Superstructure These organizational arrangements are the key features of the social relations of production , and these relations are the base, or foundation, on which the superstructure of societies is erected.

Base and Superstructure: 

Base and Superstructure Two of the adjectives most often used by Marx to describe the base were material and fundamental. He considered the superstructure, by contrast, to be less fundamental in that it was dependent upon the base; and its components were mental and social rather than material

Base and Superstructure: 

Base and Superstructure While Marx viewed the superstructure as reflecting the base, he also conceived of that relationship dialectically Reciprocal involving mutual interdependence Marx felt that he must analyze the core elements of capitalist societies, and he did so by analyzing its fundamental units as commodities (items bought and sold)

Base and Superstructure: 

Base and Superstructure

The Value of Commodities: 

The Value of Commodities Marx began defining commodities as external objects that were capable of satisfying human needs. There are two important criteria Use-value: a function of the actual physical properties of a commodity The purpose to which it can be put Its value in consumption Exchange-value: The worth of the commodity relative to other commodities In modern societies, exchange-value is expressed in monetary terms Use value equals the qualitative value while exchange-value equals the quantitative

The Value of Commodities: 

The Value of Commodities In capitalist societies, according to Marx, almost all production is directed at exchange-value rather than use-value In addition, the capitalist producer is oriented toward maximizing exchange value and reinvesting the profit in order to attain greater exchange value.

The Value of Commodities: 

The Value of Commodities Another term used is surplus value , which is the difference between the exchange value of a commodity and the cost of producing it – including the raw materials, tools and labor. It was labor that he stressed, however, because he claimed that the exchange value of any item was determined by the socially necessary labor time that was required for its production

The Value of Commodities: 

The Value of Commodities The emphasis upon labor time is also discussed in terms of the length of the working day The greater the number of hours employees are routinely expected to work for a given wage, the cheaper are the commodities they produce, and the greater the potential upside for the capitalist.

The Value of Commodities: 

The Value of Commodities Building upon the assumption that labor was the cost of producing a commodity, Marx argued that commodities which require equal amounts of socially necessary labor must have the same value.

The Circulation of Commodities: 

The Circulation of Commodities Marx, viewed societies as an evolutionary process He started off his discussion with nomadic societies where people owned little property and noted that most of the items they crated had use-value to people who produced them As societies evolved, the more important exchange value became

The Circulation of Commodities: 

The Circulation of Commodities The universal measure, then, became expressed in monetary terms Money provides the social expression of a commodity’s value – its value form However, money is only the expression, not the determinant of a commodity’s exchange value

The Circulation of Commodities: 

The Circulation of Commodities The simplest form of exchange was the barter system where each party traded. As economies became more complex, and money was introduced, the process for exchange went through a series of stages in which people continuously moved form the role of buyer to seller and back again (circulation of commodities).

The Circulation of Commodities: 

The Circulation of Commodities This entire process of circulation of commodities is fundamentally different form simple exchange because buyers and sellers are in a continuous state of change. From the circulation of commodities there develops a whole network of social connections…. In more advanced capitalistic economies, ordinary people lose even the ability mentally to grasp the full complexity of the economic networks. In more advanced capitalistic economies, ordinary people lose even the ability mentally to grasp the full complexity of the economic networks.

The Fetishism of Commodities: 

The Fetishism of Commodities Marx viewed commodities more than just as external objects. He specified two important defining attributes: Commodities are produced when Labor is organized into separate, specialist groups These groups so transform objects that the objects’ original physical nature can no longer be recognized. Ass a result, there is a tendency for people to attribute various inherent qualities to commodities as though they had lives of their own or could on their own stand in direct relations to other commodities

The Fetishism of Commodities: 

The Fetishism of Commodities So Marx introduced the fetishism of commodities because it similarly entailed an exaggerated detachment of objects from the human efforts that created them. Money is so worshiped that objects are used evaluated in terms of its monetary value An object is used to express the value of all other commodities In other words, Marx describes that fetishism of commodities as a function of their perceived detachment from human labor

The Commodification Thesis: 

The Commodification Thesis Because of the way labor is organized and the way goods are sold in the marketplace, the production of commodities in a capitalistic society tends to increase over time. The commodification thesis refers to the tendency for the products of labor in a capitalistic society to consist increasingly of commodities, as previously defined; and ultimately for labor itself to become a commodity to be purchased in a marketplace like anything else.

The Accumulation of Capital: 

The Accumulation of Capital The circulation of commodities was viewed by marks as providing the true inception of capital Capital initially takes the form of money, but not all money will become capital. Whether or not it does depends upon where money and commodities fit in the chain of exchange

The Accumulation of Capital: 

The Accumulation of Capital Marx described two possibilities. Selling in order to buy: A commodity (C) is transformed into money (M), the reconverted into a commodity (C) In summary C-M-C In this form, money has been expended, resulting in the use-value to the purchaser, at the end of the chain, the commodity is consumed Buying in order to sell. It is only in this form that money can become capital M-C-M: The motivating force is exchange value rather than use-value

The Accumulation of Capital: 

The Accumulation of Capital Money, unlike commodities, is distinguishable only in amount The C-M-C transaction has a finite end By contrast, the M-C-M continues indefinitely because the M does not disappear, its magnitude increases as profit-making continuously expands “money begets money.”

The Army of the Unemployed: 

The Army of the Unemployed As capital accumulation proceeds, investments in machinery and improved methods of production tend to diminish the size of the labor force required by the capitalists (bourgeoisie). At the same time, the potential size of the labor force typically increased by population

The Army of the Unemployed: 

The Army of the Unemployed Marx paid attention to the mechanization that pushed farm workers off the land, forcing them to seek urban employment In addition small shop owners and independent craftspeople were increasingly unable to compete with the growing capitalist firms and they were forced to join the proletariat in offering their labor

The Army of the Unemployed: 

The Army of the Unemployed The population increase and social changes contributed to the growth of a “surplus population” or reserve army of the unemployed Marx used the term “army” to capture the joyless, involuntary quality of work in a capitalistic economy. He viewed the organization of work as making workers like conscripted soldiers in an army The reserves – the unemployed who were seeking work – also resembled a (joyless, involuntary) army.

The Army of the Unemployed: 

The Army of the Unemployed In his analysis, Marx dissected the surplus population category into three distinct components, each of which ultimately created by changes in the social organization attributable to capitalism: Floating: workers usually in the urban centers of industry, who were temporarily unemployed: for example, between jobs Latent: A “reservoir” of potential workers, such as people in the process of being pushed off of farm lands Stagnant: People who were not motivated to work and were always irregularly employed

The Army of the Unemployed: 

The Army of the Unemployed Expansions and contradictions in the overall size of this reserve army were the major variable in determining the general wage levels of the proletariat The great the relative size of the arm, the more capitalists could force workers both to increase production and to accept lower wages because they felt lucky to have a job By creating conflict within the ranks of the proletariat, the army of the unemployed also reduced class solidarity, making organizing resistance by the proletariat less likely

The Army of the Unemployed: 

The Army of the Unemployed While surplus populations may provide some clear benefits to the capitalist class, there is probably an upper limit beyond which the size of the surplus population changes from and advantage into a potential threat If the size of the surplus population becomes excessive, there may be an increase in deviant behavior, and social control norms may become lax. A huge excess of people to jobs can also lead to wide[spread rejection of the status-quo and the formation of a revolutionary group, committed to radical social change

Purchasing Labor-Power: 

Purchasing Labor-Power For money to grow and become capital, Marx stated, the capitalists must find a commodity from which they can extract increased value. It is extracted from labor-power. To obtain labor power, workers must be free to sell it. The sale of labor-power as a commodity also means that workers have no other commodities to offer In other words, they do not own means of production, raw materials and sufficient resources to subsist on their own – if they did, then they would not have to sell their labor as a commodity

Purchasing Labor-Power: 

Purchasing Labor-Power What was distinctive about the capitalist phase, in Marx’s view, was that it brought together in a marketplace the owners of the means of production (and subsistence) and free workers who were the sellers of their own labor-power According to Marx, the value of one’s labor-power, like that of any other commodity, is determined by the labor time necessary for its production – and reproduction

Purchasing Labor-Power: 

Purchasing Labor-Power In practical terms, Marx analyzed that if labor-power were to remain on the market in fresh supply, workers must be able to adequately raise their children This would entail the labor-power required to produce the food, clothing, fuel, training and so on that is necessary to enable the offspring of workers to replace the current generation of workers

Purchasing Labor-Power: 

Purchasing Labor-Power Marx continues that labor-power is like any other commodity in that it belongs to the capitalist who purchased it. If the capitalist pays for a day’s work, then from the moment workers step through the door in the morning, their labor belongs to the capitalist Their labor, to the capitalist, is just another “thing,” like raw materials or machines Labor differs from the purchase of other commodities in that it is not paid for until after a contractually agree-d upon period following the completion of the work.

Surplus Value and Surplus Profit: 

Surplus Value and Surplus Profit The key to the capitalist’s profit lies in the difference between the use-value and the exchange-value of labor-power Marx assumed that workers’ subsistence probably required only about one-half day’s labor, and that set wage rates = surplus value The other half of their day’s work went to the capitalist in the form of profit = surplus profit

Surplus Value and Surplus Profit: 

Surplus Value and Surplus Profit Over time, Marx anticipated that capitalists would initially try to lengthen the working day to extract more surplus profit as well as improving labor’s productivity through technological innovations

Surplus Value and Surplus Profit: 

Surplus Value and Surplus Profit This means more non-human investment, but because the value and profit are always determined by labor costs, the rate of the profit will tend to decline when non-human investment increases When the rate of profit declines, capitalists try to cut labor costs by reducing employment When unemployment increases, effective demand for commodities is lowered, firms cut back further, and the economy goes through a downward spiral

Surplus Value and Surplus Profit: 

Surplus Value and Surplus Profit When this happens, some companies do not survive. However, labor costs have been cut in the downturn, so relative profits rebound, and the economy eventually recovers and grows again. Marx believe that such upswings and downturns were part of the intrinsic nature of capitalism; that the economy would always tend to lurch from crisis to crisis

Crisis and Revolution: 

Crisis and Revolution Marx was critical of economists who explained capitalisms volatility by claiming it as due to periodic over-production of commodities. He argued that as capitalists struggled with each other for worldwide supremacy, enormous holdings would eventually wind up in the hands of a few. For workers, this would mean more misery, oppression and degradation But, it would also bring them together physically and socially, and facilitate their eventual realization of the economic situation they share in common – thus leading to class consciousness and eventual revolution of the capitalist system.