The ABC’s of Marxist Economics

Brad Forrest

Marxist economic theory is an excellent resource for understanding how socioeconomic systems evolve. At the root of every society are the productive forces (industry, agriculture, science, and technology), and the production relationships that people occupy in the system (owners, workers, lawyers, farmers, etc).

The evolution from one epoch in history to another is not rooted in ideas, but production. If the productivity of labor is developing — for example through advances in industry, science, etc. — then the system is relatively progressive. If the productivity is in decline we have situations like that at the end of the Roman Empire, the end of feudalism, or the fall of the Stalinist regime in Russia, where the bureaucracy acted as a brake on the development of the economy. When such an economic decay happens and there exists an organized social class capable of moving society forward towards a new economic foundation, then society can experience a leap forward, a revolution, such as the capitalist revolutions of the 17th through 19th centuries.

Capitalism’s Shaky Foundations

A slave owner gives his slave food, clothing, and shelter, and in return takes the whole product of their labor. A slave is exploited in a rather obvious way. A serf, under feudalism, was tied to the land and had to give up a certain amount of his product to the feudal lord, or work a certain amount of time for free on the lord’s estate. Therefore the serf is exploited in a rather obvious way also. Capitalism works in the same manner, but in a very elusive and complex way. All of these systems take unpaid labor from the producer, slavery and serfdom obviously, capitalism deviously. The unpaid labor is called the surplus labor product. The producer works part of the time producing for their own livelihood, then they work beyond that point, and what they produce is taken without compensation by the master, lord, or employer.

In capitalist society there is a shroud of mystery concerning what exactly the exploitation of modern wageworkers consists of. The explanation of this mystery we owe to Marx. Profits are the unpaid labor of the working class. The boss pays the wageworker a sum of money each day, and this wage takes on the appearance of compensating all the labor the worker performs. However, after working four hours, for example, the worker has produced the sufficient value for the boss equal to his or her wages. But instead of going home and calling it even, the worker is made to stay a full eight hours, continuing to work and producing value for free, which turns out to be the employer’s profit.

It is difficult to grasp how the modern working class is exploited, because it appears that the exchange is equal: “I get a certain wage from my boss, and work for the contracted time. Where’s the exploitation?” Under capitalism the trick is obfuscated by the money transaction that makes it appear that we’re all equals and by the fact that the worker is paid at the end of eight hours. Because this is all done with money, we call the profit of the owner “surplus value,” which at bottom is no different than slavery or serfdom, since it is value extracted from the worker without compensation.

What is a Commodity?

Now we must go a step deeper into the mystery of capitalist society, the commodity society par excellence. It is because the commodity is the economic cell of capitalist society that Marx decided to open up his masterpiece, Capital, with a look at the commodity.

At the heart of Marxist philosophy is the recognition that everything is in constant movement, and transformation through contradiction. And that is why he analyzed the contradiction inherent in the evolution of the commodity, showing its movement and development.

A commodity is any item that can be sold at a market, and is composed of a contradiction between the “use-value” — the qualities of the commodity that can be grasped and observed and consumed — and the “exchange value” — the internal worth or value of the commodity in relation to trade. The exchange value can only be measured by comparing two commodities in relationship to each other. Why?

Marx asks, “How do we establish equality between two objects with different physical qualities?” Say you wanted to exchange a Bible for a bottle of whiskey, how do you establish equality? The answer can’t be discovered by looking at the two commodities, since their physical characteristics are qualitatively different. The answer lies with the only thing they have in common: the labor time spent in producing them.

Everything must have a use-value as a precondition for having an exchange value because if people do not find a product of labor useful, they will not want to purchase it. Exchange value is determined by labor time. Not the labor time for each individual commodity, but the “socially necessary” labor time spent on its production: “socially necessary” labor time is established behind everyone’s back through the market. For example, one Bible, say the product of an hour of labor, is traded for a bottle of whiskey, which also required an hour of labor to produce. An hour is traded for an hour, and the same goes for every other commodity on the market, meaning, that we’re really looking at a society producing for everyone else, and trading labor time!

By means of trade, society determines how many hours of labor certain items should take to create, given the materials and technology in the process. Thus, society punishes the seller for taking 12 hours to produce a shoe that is created in 3 hours — the socially necessary time — by everyone else.

Labor as a Commodity

Now this may seem a little abstract, but when we really get to know how the value of a commodity is determined we can turn our attention to the commodity that really interests us: labor power. The value of our labor power is the same as every other commodity, the socially necessary labor time spent to produce it — the food, clothing, and shelter that we need as humans to survive and work.

Because “labor power,” our vital human creative power that allows us to produce all sorts of things, is a commodity to be bought and sold under capitalism, it is treated as a thing and exploited as such. The perverse feature of capitalism is that the capitalist and worker engage in an equal exchange: the capitalist pays the workers the equivalent of the value of their labor power. But during a day of work, the workers not only create the equivalent value of their wages, they create additional value as well, which is the surplus value or profit discussed above. In this way with each new workday the capitalist becomes wealthier while the workers remain in exactly the same place since they must consume all their wages in order to survive and be in a position to continue their work.

The capitalist are the trustees of capitalist society. They control the surplus product, and with it everything else as long as private property —ownership of corporations, banks, etc. — is the norm. The capitalist is always on the lookout for profits, and in doing so raises the productivity of labor to undreamt of heights.

The capitalists exploit workers, but they also brings about the revolutionary combination of that class at the point of production. Modern wageworkers are welded together in a regular economic organism, their collective production brings about a collectivist consciousness, and a desire to free themselves from capitalist exploitation. As the capitalist system grows to maturity it produces a class (the working class) with the capability and incentive to create a higher socioeconomic order. By collectivizing the economy we would only be giving the coup de grace to an outlived economic system, and replacing it with one based on human need rather than cold calculating greed. By combing social ownership of the economy with democratic oversight, the pre-conditions for a new society would be in place.

Tags: ,