An Introduction to Marxist Economic Theory

An Introduction to bolshie ECONOMIC THEORY Ernest Mandel 2 An access to bolshy scotch ) was the close influential exp wizard(a)nt of bolshy economic possibleness in the Western populace during the second half of the twentieth nose back enddy, and is best know for his defeatful deuce-volume exertion Marxist Economic hypothesis (1962) and his brilliant Late Capitalism (1972).In the tierer, he present that it was possible, on the root word of the contemporary data, to reconstitute the safe and sound economic clay of Karl Marx vitamin C years after the first publication of Marxs Capital. In the latter gain, Mandel provided an explanation of the ca practice sessions of the 20-year wave of rapid growth of the world capitalisticicicicic sparing after World War II, which as well demonst pastured that it would soon be followed by an indeterminately keen-sighted wave of lots slower economic growth, and recur require affable and political crises in the create capitali st countries.Late Capitalism withal provided the first comprehensive analysis of the new features of global capitalist economy that emerged in the post-war period and that ar until now with us to mean solar day transnational corporations as the dominant ricochet of capitalist business organisation, the enormous growth of the services vault of heaven, the crucial role of state expenditure in propping up an economic brass marked by financial instableness, long-term stagnation punctuated by speculative booms, blank consumerism and accel sequenceting environmental destruction.This pamphlet, which was first published in French in 1964, provides a concise exposition of the simple(a) princples of Marxist economic theory. In the first section, Mandel elucidates the basic categories of Marxs economic doctrine from the emergence of the well-disposed redundant crossroad to the roil theory of cheer. In the second section, he explains the basic laws of motion of capitalist economy and its in present(predicate)nt contradictions.In the final second, he applies these to several(prenominal) of the new features exhibited by the new stage of imperialist capitalist economy that emerged after the second world war, which at the beat he termed neo-capitalism. In his more mature crap Late Capitalism, Mandel abandoned this term in favour of the designation late capitalism, explaining in the ledger entry to 4 An IntroductIon to MArxIst EconoMIc conjecture that work that the designation neo-capitalism could be falsely construe to imply either a radical continuity or discontinuity with traditional capitalism.Instead, Mandel stressed that the era of late capitalism is non a new epoch of capitalist growing completely when merely a further development of the imperialist, monopoly-capitalist epoch with the eccentric personistics of the imperialist epoch enumerated by Lenin at the undertakening of the 20th speed of light remaining fully valid for late capitalism.? I. thE hypothesis of time foster And excess abide by In the last analysis, e truly step forward in the history of civilisation has been brought around by an ontogenesis in the productivity of labor movement.As long as a submitn group of men b atomic number 18ly arrived copious to keep itself alive, as long as on that maneuver in time was no unembellished over and above this prerequisite product, it was impossible for a instalment of force back to take erupt and for artisans, artists or scholars to make their appearance. Under these conditions, the good prerequisites for much(prenominal) specialisation could non possibly be attained. socIAl superfluous product As long as the productivity of dig up dust at a level where one man can tho produce enough for his own subsis decenniumce, companionable division does non take place and whatsoever neighborly contraryiation at bottom b each(prenominal) club is impossible.Under these conditions, only men are m anu itemuring businesss and they are all on the said(prenominal) economic level. Every profit in the productivity of crusade beyond this low read makes a small bare possible, and once in that location is a sur convinced(p) of products, once mans both hands can produce more than is demand for his own subsistence, then the conditions squander been adjust for a struggle over how this supererogatory entrust be dowryd. From this point on, the add up give a moodput of a accessible group no longer consists solely of weary incumbent for the subsistence of the producers.Some of this crusade output may now be designd to release a section of familiarity from having to work for its own subsistence. Whenever this location arises, a section of rescript can become a ruling class, whose outstanding characteristic is its drop by the waysidedom from the expect of First presented at an educational weekend organised by the Paris Federation of the coupled Socialist Party in 1 963 and by and by published in Les Cahiers du Centre dEtudes Socialistes, February 1964. 6 An IntroductIon to MArxIst EconoMIc thEory working for its own subsistence.Thereafter, the dig up of the producers can be divided into two leave. A part of this mash continues to be practiced for the subsistence of the producers themselves and we hollo this part incumbent hollow the separate part is used to maintain the ruling class and we give it the name surplus ride. Let us illustrate this by the very clear caseful of plantation slavery, as it existed in genuine regions and periods of the romish Empire, or as we find it in the West Indies and the islands of Portuguese Africa starting with the 17th century, on the outstanding plantations which were ceremonious there.In these tropical areas, regular the slaves food was generally non provided by the master the slave had to produce this himself by working a tiny plot of ground on Sun age and the products from this get the pic ture constituted his store of food. On six days of the week the slave worked on the plantation and receive in re put out none of the products of his advertise. This is the proletariat which creates a social surplus product, surrendered by the slave as soon as it is produced and belonging solely to the slavemaster.The work week, which in this case is s counterbalance days, can be divided into two parts the work of one day, Sunday, constitutes undeniable crusade, that outwear which provides the products for the subsistence of the slave and his family the work of the a nonher(prenominal) six days is surplus labour and all of its products go to the master, are used for his sustenance and his enrichment as well. The great domains of the early Middle Ages furnish us with another illustration. The land of these domains was divided into iii parts the communal lands consisting of forest, meadows, swamps, etc. the land worked by the villein for his own and his familys subsistence and finally, the land worked by the serf in order to maintain the feudal ecclesiastic. The work week during this period was usually six days, not seven. It was divided into two equal parts the serf worked three days on the land from which the father belonged to him the other three days he worked on the feudal manufacturing businesss land, without remuneration, supplying free labour to the ruling class. The products of distri justively of these two very contrasting causes of labour can be specify in diametrical terms.When the producer is perform indispensable labour, he is producing a incumbent product. When he is performing surplus labour, he is producing a social surplus product. Thus, social surplus product is that part of social product which is produced by the labouring class but appropriated by the ruling class, regard slight of the form the social surplus product may assume, whether this be one of natural products, or commodities to be sold, or money. intemperance car e for is simply the monetary form of the social surplus product. The Theory of order and Surplus Value When the ruling class appropriates the part of societys proceeds previously defined as surplus product exclusively in the monetary form, then we use the term surplus esteem or else of surplus product. As we shall see afterwards on, however, the above only constitutes a preliminary nest to the definition of surplus value. How does social surplus product come into existence? It arises as a gist of a gratuitous appropriation, that is, an appropriation without compensation, by a ruling class of a part of the mathematical product of a producing class.When the slave worked six days a week on a plantation and the intact product of his labour was taken by the master without every compensation to the slave, the origin of the social surplus product here is in the gratuitous labour, the uncompensated labour, supplied by the slave to the master. When the serf worked three days a week on the lords land, the origin of this income, of this social surplus product, is likewise to be found in the uncompensated labour, the gratuitous labour, furnished by the serf.We pass on see further on that the origin of capitalist surplus value, that is to differentiate, the revenue of the bourgeois class in capitalist society, is leasely the very(prenominal) it is uncompensated labour, gratuitous labour, which the proletarian, the wage worker, gives the capitalist without receiving some(prenominal) value in sub. coMModItIEs, usE VAluE And tack VAluE We energize now developed several basic definitions which impart be used passim this exposition. A emergence of others mustiness be added at this point. Every product of benignant labour unremarkably possesses utility it must be able to satisfy a human need.We may indeed say that every product of human labour has a use value. The term use value will, however, be used in two different senses. We will speak of the use va lue of a goodness we will also talk about use values, as when we refer, for example, to a society in which only use values are produced, that is to say, where products are created for direct inspiration either by the producers themselves or by ruling classes which appropriate them. Together with this use value, a product of human labour can also energise another value, an transform value.It may be produced for fortune meeting on the market place, for the innovation of world sold, rather than for direct consumption by the producers or by wealthy classes. A cumulus of products which has been created for the purpose of beness sold can no longer be considered as the drudgery of simple use values it is now a return of commodities. The commodity, therefore, is a product created to be exchanged on the market, as opposed to one which has been made for direct consumption. Every 8 An IntroductIon to MArxIst EconoMIc thEory commodity must rich person both a use value and an exc hange value.It must turn in a use value or else nobody would buy it, since a purchaser would be concern with its ultimate consumption, with full-blooded some want of his by this purchase. A commodity without a use value to some(prenominal)one would consequently be unsaleable, would constitute useless production, would have no exchange value precisely because it had no use value. On the other hand, every product which has use value does not necessarily have exchange value. It has an exchange value only to the extent that the society itself, in which the commodity is produced, is founded on exchange, is a society where exchange is green practice.Are there societies where products do not have exchange value? The posterior for exchange value, and a fortiori for trade and the market place, is constituted by a attached full stop of development of the division of labour. In order for products not to be directly consumed by their producers, it is essential that everybody should not be engaged in turning out the aforesaid(prenominal) thing. If a particular community has no division of labour, or only its close to rudimentary form, then it is clear that no reason for exchange exists. Normally, a wheat farmer has nothing to exchange with another wheat farmer.But as soon as a division of labour exists, as soon as there is contact among social groups producing different use values, then exchange can come about, at first on an occasional keister, subsequently on a more permanent one. In this way, little by little, products which are made to be exchanged, commodities, make their appearance alongside those products which are simply made for the direct consumption of their producers. In capitalist society, commodity production, the production of exchange values, has r each(prenominal)ed its greatest development.It is the first society in human history where the study part of production consists of commodities. It is not true, however, that all production under ca pitalism is commodity production. Two classes of products simmer down remain simple use value. The first group consists of all things produced by the peasantry for its own consumption, everything directly consumed on the farms where it is produced. Such production for self-consumption by the farmer exists even in advance(a) capitalist countries like the unify States, although it constitutes only a small part of total rustic production.In general, the more backward the cultivation of a country, the greater is the fraction of agricultural production going for self-consumption. This factor makes it extremely difficult to calculate the exact national income of such countries. The second group of products in capitalist society which are not commodities but remain simple use value consists of all things produced in the home. Despite the fact that considerable human labour goes into this type of household The Theory of Value and Surplus Value 9 production, it still remains a productio n of use values and not of commodities.Every time a soup is made or a button sewn on a garment, it constitutes production, but it is not production for the market. The appearance of commodity production and its subsequent regularisation and initiation have radically transformed the way men labour and how they organise society. thE MArxIst thEory of AlIEnAtIon You have no doubt already heard about the Marxist theory of alienation. The emergence, regularisation and generalisation of commodity production are directly related to the expanding character of this phenomenon of alienation.We cannot dwell on this aspect of the school principal here but it is extremely important to call upkeep to it, since the history of trade covers far more than the capitalist era. It also includes humble commodity production, which we will handle later. There is also a postcapitalist society establish on commodities, a transitional society in the midst of capitalism and socialism, such as present-day Soviet society, for the latter still rests in very striking measure on the foundations of exchange value production.Once we have grasped certain(prenominal) organic characteristics of a society establish on commodities, we can readily see wherefore it is impossible to surmount certain phenomena of alienation in the transitional period in the midst of capitalism and socialism, as in Soviet society, for example. manifestly this phenomenon of alienation does not exist at least in the resembling form in a society where commodity production is unknown and where the life of the individual and his social activity are united in the most elementary way. Man works, but generally not by himself most often he is part of a collective group having a more or less organic structure.His labour is a direct transformation of material things. each(prenominal) of this representation that labour activity, the act of production, the act of consumption, and the relations amongst the individual and his society are ruled by a condition of equilibrium which has relative stability and permanence. We should not, of course, embellish the picture of primitive society, which was return to pressures and periodic catastrophes because of its extreme poverty. Its equilibrium was ever endangered by scarcity, hunger, natural disasters, etc.But in the periods between catastrophes, especially after agriculture had attained a certain degree of development and when climatic conditions were favourable, this kind of society gift all human activities with a large degree of unity, harmony and stability. Such disastrous consequences of the division of labour as the elimination of all aesthetic activity, chaste inspiration and creative activity from the act 10 An IntroductIon to MArxIst EconoMIc thEory of production and the substitution of purely mechanical and repetitive tasks were nonexistent in primitive society.On the contrary, most of the arts, music, sculpture, painting, the dance, we re originally relate to production, to labour. The desire to give an attractive and appealing form to products which were to be used either by the individual, his family, or larger kinship groups, found a normal, harmonious and organic expression within the framework of the days work. Labour was not looked upon as an obligation imposed from without, first of all because it was far less intense, far less exhausting than under capitalism today. It conformed more closely to the rhythms of the human organism as well as to the rhythms of nature.The number of working days per year rarely exceeded 150 to 200, whereas under capitalism the figure is dangerously close to 300 and some times even greater. Furthermore, there was a unity between the producer, his product and its consumption, since he generally produced for his own use or for those close to him, so that his work possess a directly functional aspect. Modern alienation originates basically in the cleavage between the producer and his product, outcomeing both from the division of labour and commodity production.In other words, it is the consequence of working for the market, for unknown consumers, instead of for consumption by the producer himself. The other side of the picture is that a society which only produces use values, that is, goods which will be consumed directly by their producers, has always in the past been an impoverished society. Not only was it subject to the hazards of nature but it also had to baffle very narrow limits to mans wants, since these had to conform just now to its degree of poverty and restrict configuration of products.Not all human wants are innate to man. There is a constant interaction between production and wants, between the development of the productive forces and the rise of new wants. lonesome(prenominal) in a society where labour productivity will be developed to its highest point, where an infinite variety of products will be operable, will it be possible for ma n to experience a continuous expansion of his wants, a development of his own unlimited potential, an integrated development of his humanity. thE lAw of VAluEOne of the consequences of the appearance and proceedive generalisation of commodity production is that labour itself begins to take on regular and measurable characteristics in other words, it ceases to be an activity tied to the rhythms of nature and according with mans own physiological rhythms. Up to the nineteenth century and possibly even into the 20th, the peasants in various regions of Western Europe did not work in a set way, that is to The Theory of Value and Surplus Value 11 say, they did not work with the same intensity every month of the year.There were periods in the work year when they worked very hard and other periods, peculiarly during the winter, when all activity virtually came to a halt. It was in the most backward agricultural areas of most of the capitalist countries that capitalist society, in the co urse of its development, found a most attractive source of reserve man index finger, for here was a labour force available for four to six months a year at much lower yield, in view of the fact that a part of its subsistence was provided by its agricultural activity.When we look at the more highly developed and prosperous farms, those bordering the big cities, for example, and which are basically on the road to congruous industrialised, we see that work is much more regular and the amount of expended labour much greater, being distributed in a regular way throughout the year, with dead seasons progressively eliminated. This holds true not only for our times but even as early as the Middle Ages, at least from the 12th century on.The closer we get to the cities, that is to say, to the mart, the more the peasants labour becomes labour for the market, that is to say, commodity production, and the more regulated and more or less stable his labour becomes, just as if he were working in spite of appearance an industrial attempt. evince another way, the more generalised commodity production becomes, the greater the regulation of labour and the more society becomes organised on the basis of an accounting system system founded on labour.When we examine the already fairly advanced division of labour within a commune at the beginning of commercial message and craft development in the Middle Ages, or the collectives in such civilisations as the Byzantine, Arab, Hindu, Chinese and Japanese, certain common factors emerge. We are struck by the fact that a very advanced integration of agriculture and various craft techniques exists and that regularity of labour is true for the countryside as well as the city, so that an accounting system in terms of labour, in labour-hours, has become the force governing all the activity and even the very structure of the collectives.In the chapter on the law of value in my Marxist Economic Theory, I give a whole series of examples of t his accounting system in work-hours. There are Indian crossroadss where a certain caste holds a monopoly of the blacksmith craft but continues to work the land at the same time in order to feed itself. The rule which has been established is this when a blacksmith is engaged to make a dent or weapon for a farm, the client supplies the afflictive materials and also works the blacksmiths land during the whole period that the latter is engaged in making the implement.Here is a very transparent way of stating that exchange is governed by an equating in work-hours. In the Japanese villages of the Middle Ages, an accounting system in work- 12 An IntroductIon to MArxIst EconoMIc thEory hours, in the literal sense of the term, existed inside the village community. The village accountant kept a kind of great book in which he entered the number of hours of work done by villagers on each others fields, since agriculture was still mainly ground on accommodative labour, with harvesting, far m construction and stock breeding being done in common.The number of work-hours furnished by the members of one household to the members of another was very tendingfully tallied. At the end of the year, the exchanges had to balance, that is, the members of household B were inevitable to have given household A exactly the same number of work-hours which members of household A had given household B during the year. The Japanese even refined things to the point close 1000 years agone where they took into account that children provided a smaller quantity of labour than adults, so that an hour of child labour was worth(predicate) only a half-hour of adult labour. A whole system of accounting was set up along these lines. There is another example which gives us a direct insight into this accounting system ground on labour-time the mutation of feudal rent from one form to another. In feudal society, the agricultural surplus product could take three different forms rent in the form o f labour (the corvee), rent in kind, and money rent.When a change is made from the corvee to rent in kind, obviously a border of conversion takes place. Instead of giving the lord three days of labour per week, the peasant now gives him a certain quantity of wheat, livestock, etc. , on a seasonal basis. A second conversion takes place in the changeover from rent in kind to money rent. These two conversions must be based on a fairly rigorous accounting in work-hours if one of the two parties does not care to suffer a loss in the bear upon.For example, if at the time the first conversion was effected, the peasant gave the lord a quantity of wheat which required only 75 workdays of labour, whereas previously he had given the lord 150 workdays of labour in the same year, then this conversion of labour-rent into rent in kind would result in the sudden impoverishment of the lord and a rapid enrichment of the serfs. The landlords you can depend on them were sleepless to see to it when the conversion was made that the different forms of rent were closely equivalent. Of course the conversion could eventually turn out to be bad one for one of the participating classes, for example, against the landlords, if a sharp rise in agricultural impairments occurred after rent was converted from rent in kind to money rent, but such a result would be historical in character and not directly attributable to the conversion per se. The origin of this economy based on an accounting in labour-time is also clearly apparent in the division of labour within the village as it existed The Theory of Value and Surplus Value 13 between agriculture and the crafts. For a long time the division remained quite rudimentary.A section of the peasantry continued to produce part of its own clothing for a protracted historical period, which in Western Europe encompassing almost a thousand years that is, from the beginning of the medieval cities right up to the 19th century. The technique of makin g clothing was certainly no mystery to the cultivator of the soil. As soon as a regular system of exchange between the farmer and textile craftsman was established, standard equivalents were likewise established for example, an ell of cloth a measure varying from 27 to 48 inches would be exchanged for 10 pounds of butter, not for 100 pounds.Obviously the peasants knew, on the basis of their own experience, the approximate labour-time needed to produce a given quantity of cloth. Had there not been a more or less exact equivalence between the time needed to produce the cloth and the time needed to produce the butter for which it was exchanged, there would have been an immediate careen in the division of labour.If cloth production were more lucrative than butter production, the butter producers would switch to producing cloth. Since society here was only at the threshold of an extreme division of labour, that is to say, it was still at a point where the boundaries between different t echniques were not clearly marked, the passage from one economic activity to another was still possible, particularly when striking material gains were possible by government agency of such a change.In the cities of the Middle Ages as well, a very skilfully calculated equilibrium existed between the various crafts and was written into the charters which specified almost to the minute the amount of labour-time necessary for the production of different holds. It is inconceivable that under such conditions a deep-dish pie or blacksmith might get the same amount of money for a product which took half the labour-time which a weaver or other artisan might require in order to get the same amount of money for his products.Here again we clearly see the mechanism of an accounting system in workhours, a society functioning on the basis of an economy of labour-time, which is generally characteristic of the whole phase which we call small-scale commodity production. This is the phase interven ing between a purely natural economy, in which only use values are produced, and capitalist society, in which commodity production expands without limit. dEtErMInAtIon of thE ExchAngE VAluE of coMModItIEsOnce we have determined that the production and exchange of commodities becomes regular and generalised in a society based on an economy of labourtime, on an accounting system in work-hours, we can readily understand why 14 An IntroductIon to MArxIst EconoMIc thEory the exchange of commodities, in its origins and inherent nature, rests on this fundamental basis of an accounting system in work-hours and consequently follows this general rule the exchange value of a commodity is determined by the quantity of labour necessary to produce it.The quantity of labour is metric by the length of time it takes to produce the commodity. This general definition of the labour theory of value is the basis of both classical bourgeois political economy from the 17th century to the beginning of the 19th century, from William small-minded to Ricardo and Marxist economic theory, which took over the theory of labour value and perfected it. However, the general definition must be qualified in several respects.In the first place, not all men are endowed with the same capacity for work, with the same strength or the same degree of skill at their trade. If the exchange value of commodities depended only on the quantity of labour expended individually, that is, on the quantity of labour expended by each individual in the production of a commodity, we would arrive at this absurdity the lazier or more incapable the producer, and the larger the number of hours he would spend in making a pair of shoes, the greater would be the value of the shoesThis is obviously impossible since exchange value is not a moral reinforcement for mere willingness to work but an objective bond set up between independent producers in order to equalise the various crafts in a society based both on a division of labour and an economy of labour-time. In such a society wasted labour receives no compensation on the contrary, it is automatically penalised. Whoever puts more time into producing a pair of shoes than the medium necessary hours an average determined by the average productivity of labour and recorded in the Guild Charters, for example such a person has wasted human labour, worked to no avail for a certain number of hours. He will receive nothing in exchange for these wasted hours. Expressed another way, the exchange value of a commodity is not determined by the quantity of labour expended by each individual producer engaged in the production of this commodity but by the quantity of labour socially necessary to produce it. The expression socially necessary means the quantity of labour necessary under the average conditions of labour productivity existing in a given country at a given time.The above qualification has very important applications when we examine the functioning of capitalist society more closely. Another clarifying statement must be added here. Just what do we mean by a quantity of labour? Workers differ in their qualifications. Is there complete e role between one persons hour of work and everybody elses, regardless of such residuums in skills? Once again the question is not a moral one but has The Theory of Value and Surplus Value 15 o do with the internal logic of a society based on an equality between skills, an equality in the marketplace, and where any disruption of this equality would immediately destroy the social equilibrium. What would happen, for example, if an hours work by an un consummate labourer was worth as much as an hours work by a skilled craftsman, who had spent four to six years as an assimilator in acquiring his skill? Obviously, no one would want to become skilled. The hours of work spent in learning a craft would be wasted hours since the craftsman would not be compensated for them after becoming qualified.In an eco nomy founded on an accounting system of work-hours, the young will desire to become skilled only if the time lost during their training period is subsequently paid for. Our definition of the exchange value of a commodity must therefore be completed as follows An hour of labour by a skilled worker must be considered as complex labour, as fuse labour, as a multiple of an hour of unskilled labour the coefficient of multiplication obviously cannot be an arbitrary one but must be based on the cost of acquiring a given skill. It should be pointed out, in passing, that there was always a certain fuzziness in the prevailing explanation of compound labour in the Soviet yoke under Stalin which has persisted to this very day. It is claimed that compensation for work should be based on the quantity and quality of the work, but the fancy of quality is no longer understood in the Marxist sense of the term, that is to say, as a quality measurable quantitatively by means of a item coefficient o f multiplication. On the contrary, the idea of quality is used in the ourgeois ideological sense, according to which the quality of labour is supposed to be determined by its social usefulness, and this is used to justify the incomes of marshals, ballerinas and industrial managers, which are ten times higher than the incomes of unskilled labourers. Such a theory belongs in the domain of apologetics despite its far-flung use to justify the enormous differences in income which existed under Stalin and continue to exist in the Soviet Union today, although to a lesser extent.The exchange value of a commodity, then, is determined by the quantity of labour socially necessary for its production, with skilled labour being taken as a multiple of simple labour and the coefficient of multiplication being a reasonably measurable quantity. This is the kernel of the Marxist theory of value and the basis for all Marxist economic theory in general.Similarly, the theory of social surplus product and surplus labour, which we discussed at the beginning of this work, constitutes the basis for all Marxist sociology and is the bridge connecting Marxs sociological and historical analysis, his theory of classes and the development of society 16 An IntroductIon to MArxIst EconoMIc thEory generally, to Marxist economic theory, and more precisely, to the Marxist analysis of all commodity-producing societies of a precapitalist, capitalist and postcapitalist character. hAt Is socIAlly nEcEssAry lAbour? A short while back I stated that the particular definition of the quantity of socially necessary labour for producing a commodity had a very special and extremely important application in the analysis of capitalist society. I think it will be more useful to deal with this point now although logically it might belong to a later section of this presentation. The totality of all commodities produced in a country at a given time has been produced to satisfy the wants of the sum total of the mem bers of this society.Any article which did not satisfy somebodys involve, which had no use value for anyone, would be a priori unsaleable, would have no exchange value, would not constitute a commodity but simply a product of caprice or the idle jest of some producer. From another angle, the sum total of buying power which exists in this given society at a given moment and which is not to be hoarded but spent in the market, must be used to buy the sum total of commodities produced, if there is to be economic equilibrium.This equilibrium therefore implies that the sum total of social production, of the available productive forces in this society, of its available work-hours, has been distributed among the various sectors of sedulousness in the same proportions as consumers distribute their buying power in satisfying their various wants. When the distribution of productive forces no longer corresponds to this division in wants, the economic equilibrium is unmake and both overproduc tion and underproduction appear side by side.Let us give a rather tired example toward the end of the 19th and beginning of the 20th century, a city like Paris had a coach-building industry, which together with associated harness trades employed thousands or even tens of thousands of workers. In the same period the automobile industry was emerging and although still quite small it already numbered some scores of manufacturers employing several thousands of workers. Now what is the process taking place during this period? On the one hand, the number of getups begins to decline and on the other, the number of automobiles begins to increase.The production of carriages and carriage equipment therefore shows a trend toward exceeding social needs, as these are reflected in the style in which the inhabitants of Paris are dividing their buying power on the other side of the picture, the production of automobiles is downstairs social needs, for from the time the industry was launched unt il the advent The Theory of Value and Surplus Value 17 of mass production, a climate of scarcity existed in this industry. The supply of automobiles on the market was never equal to the demand. How do we express these phenomena in terms of the labour theory of value?We can say that in the carriage industry more labour is expended than is socially necessary, that a part of the labour expended by the sum total of companies in the carriage industry is socially wasted labour, which no longer finds an equivalent on the marketplace and is consequently producing unsaleable goods. In capitalist society, when goods are unsaleable it means that an investment of human labour has been made in a specific industrial offshoot which turns out to be socially extra labour, that is to say, it is labour which finds no equivalent in buying power in the marketplace.Labour which is not socially necessary is wasted labour it is labour which produces no value. We can see from this that the concept of soci ally necessary labour embraces a whole series of phenomena. For the products of the carriage industry, supply exceeds demand, prices fall and goods remain unsaleable. The reverse is true in the automobile industry where demand exceeds supply, causing prices to rise and under-production to exist. To be satisfied with these commonplaces about supply and demand, however, means stopping at the psychological and individual aspects of the problem.On the other hand, if we probe into the deeper social and collective side of the problem, we begin to understand what lies on a lower floor the surface in a society organised on the basis of an economy of labour-time. The meaning of supply exceeding demand is that capitalist production, which is anarchistic, unplanned and unorganised, has anarchistically invested or expended more labour hours in an industrial branch than are socially necessary, so that a whole segment of labour-hours turns out to be pure loss, so much wasted human labour which re mains unrequited by society.Conversely, an industrial sector where demand continues to be greater than supply can be considered as an underdeveloped sector in terms of social needs it is therefore a sector expending fewer hours of labour than are socially necessary and it receives a bonus from society in order to stimulate an increase in production and achieve an equilibrium with social needs. This is one aspect of the problem of socially necessary labour in the capitalist system. The other aspect of the problem is more directly related to changes in the productivity of labour.It is the same thing but makes an victimizeion of social needs, of the use value aspect of production. In capitalist society the productivity of labour is constantly changing. Generally speaking, there are always three types of enterprises (or industrial sectors) those which are technologically right at the social average those which 18 An IntroductIon to MArxIst EconoMIc thEory are backward, obsolete, on th e downgrade, below the social average and those which are technologically advanced and above average in productivity.What do we mean when we say a sector or an enterprise is technologically backward and has a productivity of labour which is below the average? Such a branch or enterprise is analogous to our previously mentioned lazy shoemaker, that is, it is one which takes five hours to produce a specific quantity of goods in a period when the average social productivity demands that it be done in three hours. The two extra hours of expended labour are a total loss, a waste of social labour.A portion of the total amount of labour available to society having thus been wasted by an enterprise, it will receive nothing from society to compensate it. Concretely it means that the lead astraying prices in this industry or enterprise, which is operating below average productivity, approach its production costs or even fall below them, that is to say, the enterprise is operating at a very l ow rate of profit or even at a loss. On the other hand, an enterprise or industrial sector with an above average level of productivity (like the shoemaker who can produce two pairs of shoes n three hours when the social average is one pair per three hours) economises in its expenditure of social labour and therefore makes a surplus profit, that is to say, the difference between its costs and transfering prices will be greater than the average profit. The spare-time activity of this surplus profit is, of course, the driving force behind the entire capitalist economy. Every capitalist enterprise is forced by competition to try to get greater profits, for this is the only way it can constantly improve its technology and labour productivity.Consequently all firms are forced to take this same direction, and this of course implies that what at one time was an aboveaverage productivity winds up as the new average productivity, whereupon the surplus profit disappears. All the strategy of capitalist industry stems from this desire on the part of every enterprise to achieve a rate of productivity superior to the national average and thereby make a surplus profit, and this in turn provokes a movement which causes the surplus profit to disappear, by virtue of the trend for the average rate of labour productivity to rise continuously.This is the mechanism in the tendency for profit rates to become equalised. thE stock certificate And nAturE of surplus VAluE And now, what is surplus value? When we consider it from the viewpoint of the Marxist theory of value, the dish is readily found. Surplus value is simply the monetary form of the social surplus product, that is to say, it is the monetary form of that part of the workers production which he surrenders to the owner of the means of production without receiving anything in return. The Theory of Value and Surplus Value 19 How is this surrender accomplished in practice within capitalist society?It takes place through the process of exchange, like all important carrying outs in capitalist society, which are always relations of exchange. The capitalist buys the labour-power of the worker, and in exchange for this wage, he appropriates the entire production of that worker, all the newly produced value which has been incorporated into the value of this production. We can therefore say from here on that surplus value is the difference between the value produced by the worker and the value of his own labourpower. What is the value of labour-power?In capitalist society, labour-power is a commodity, and like the value of any other commodity, its value is the quantity of labour socially necessary to produce and reproduce it, that is to say, the invigoration costs of the worker in the wide meaning of the term. The concept of a minimum subsisting wage or of an average wage is not a physiologically rigid one but incorporates wants which change with advances in the productivity of labour. These wants tend to increase parallel with the progress in technique and they are consequently not comparable with any degree of accuracy for different periods.The minimum living wage of 1830 cannot be compared quantitatively with that of 1960, as the theoreticians of the French Communist party have learned to their sorrow. There is no valid way of comparing the price of a motorcycle in 1960 with the price of a certain number of kilograms of meat in 1830 in order to come up with a conclusion that the first is worth less than the second. Having made this reservation, we can now repeat that the living cost of labour-power constitutes its value and that surplus value is the difference between this living cost and the value created by this labour-power.The value produced by labour-power can be measured in a simple way by the length of time it is used. If a worker works 10 hours, he produces a value of 10 hours of work. If the workers living costs, that is to say, the equivalent of his wage, is also 10 hour s of work, then no surplus value would result. This is only a special case of the more general rule when the sum total of labour product is equal to the product required to feed and maintain the producer, there is no social surplus product.But in the capitalist system, the degree of labour productivity is such that the living costs of the worker are always less than the quantity of newly created value. This means that a worker who labours for 10 hours does not need the equivalent of 10 hours of labour in order to support himself in accordance with the average needs of the times. His equivalent wage is always only a fraction of his days labour everything beyond this fraction is surplus value, free labour supplied by the worker and appropriated by the capitalist without an equivalent offset.If this difference did not exist, of course, then no employer would hire 20 An IntroductIon to MArxIst EconoMIc thEory any worker, since such a purchase of labour-power would cultivate no profit t o the buyer. thE VAlIdIty of thE lAbour thEory of VAluE To conclude, we present three traditional proofs of the labour theory of value. The first of these is the analytical proof, which proceeds by open frame down the price of a commodity into its constituent elements and demonstrating that if the process is extended far enough, only labour will be found.The price of every commodity can be trim down to a certain number of components the amortisation of machinery and buildings, which we call the renewal of fixed capital the price of raw materials and accessory products wages and finally, everything which is surplus value, such as profit, rent, taxes, etc. So far as the last two components are concerned, wages and surplus value, it has already been shown that they are labour pure and simple. With regard to raw materials, most of their price is largely reducible to labour for example, more than 60% of the mining cost of coal consists of wages.If we start by breaking down the average manufacturing cost of commodities into 40% for wages, 20% surplus value, 30% for raw materials and 10% in fixed capital and if we assume that 60% of the cost of raw materials can be reduced to labour, then we already have 78% of the total cost reduced to labour. The rest of the cost of raw materials breaks down into the cost of other raw materials reducible in turn to 60% labour plus the cost of amortising machinery. The price of machinery consists to a large degree of labour (for example, 40%) and raw materials (for example, 40% also).The share of labour in the average cost of all commodities thus passes successively to 83%, 87%, 89. 5%, etc. It is obvious that the further this breakdown is carried, the more the entire cost tends to be reduced to labour, and to labour alone. The second proof is the logical proof, and is the one presented in the beginning of Marxs Capital. It has perplexed quite a few readers, for it is certainly not the simplest pedagogical approach to the questi on. Marx poses the question in the following way. The number of commodities is very great.They are interchangeable, which means that they must have a common quality, because everything which is interchangeable is comparable and everything which is comparable must have at least one quality in common. Things which have no quality in common are, by definition, not comparable with each other. Let us inspect each of these commodities. What qualities do they possess? The Theory of Value and Surplus Value 21 First of all, they have an infinite set of natural qualities weight, length, density, colour, size, molecular nature in short, all their natural physical, chemical and other qualities.Is there any one of the physical qualities which can be the basis for comparing them as commodities, for serving as the common measure of their exchange value? Could it be weight? Obviously not, since a pound of butter does not have the same value as a pound of gold. Is it volume or length? Examples will immediately show that it is none of these. In short, all those things which make up the natural quality of a commodity, everything which is a physical or chemical quality of this commodity, certainly determines its use value, its relative usefulness, but not its exchange value.Exchange value must consequently be abstracted from everything that consists of a natural physical quality in the commodity. A common quality must be found in all of these commodities which is not physical. Marxs conclusion is that the only common quality in these commodities which is not physical is their quality of being the products of human labour, of abstract human labour. Human labour can be thought of in two different ways. It can be considered as specific concrete labour, such as the labour of the baker, butcher, shoemaker, weaver, blacksmith, etc.But so long as it is thought of as specific concrete work, it is being viewed in its aspect of labour which produces only use values. Under these conditions we are concerning ourselves only with the physical qualities of commodities and these are precisely the qualities which are not comparable. The only thing which commodities have in common from the viewpoint of exchanging them is that they are all produced by abstract human labour, that is to say, by producers who are related to each other on a basis of equivalence as a result of the fact that they are all producing goods for exchange.The common quality of commodities, consequently, resides in the fact that they are the products of abstract human labour and it is this which supplies the measure of their exchange value, of their exchangeability. It is, consequently, the quality of socially necessary labour in the production of commodities which determines their exchange value. Let us immediately add that Marxs reasoning here is both abstract and difficult and is at least subject to questioning, a point which many opponents of Marxism have seized upon and sought to use, without any mar ked success, however.Is the fact that all commodities are produced by abstract human labour really the only quality which they have in common, apart from their natural qualities? There are not a few writers who thought they had discovered others. In general, 22 An IntroductIon to MArxIst EconoMIc thEory however, these have always been reducible either to physical qualities or to the fact that they are products of abstract labour. A third and final proof of the correctness of the labour theory of value is the proof by simplification to the absurd. It is, moreover, the most elegant and most fashionrn of the proofs.Imagine for a moment a society in which living human labour has completely disappeared, that is to say, a society in which all production has been 100% automated. Of course, so long as we remain in the current intermediate stage, in which some labour is already completely automated, that is to say, a stage in which plants employing no workers exist alongside others in whic h human labour is still utilised, there is no special theoretical problem, since it is merely a question of the transfer of surplus value from one enterprise to another.It is an illustration of the law of equalisation of the profit rate, which will be explored later on. But let us imagine that this development has been pushed to its extreme and human labour has been completely eliminated from all forms of production and services. Can value continue to exist under these conditions? Can there be a society where nobody has an income but commodities continue to have a value and to be sold? Obviously such a situation would be absurd. A huge mass of products would be produced without this production creating any income, since no human being would be involved in this production.But someone would want to sell these products for which there were no longer any buyers It is obvious that the distribution of products in such a society would no longer be effected in the form of a sale of commodit ies and as a effect of fact selling would become all the more absurd because of the abundance produced by general automation. Expressed another way, a society in which human labour would be totally eliminated from production, in the most general sense of the term, with services included, would be a society in which exchange value had also been eliminated.This proves the validity of the theory, for at the moment human labour disappears from production, value, too, disappears with it. II. cApItAl And cApItAlIsM cApItAl In prEcApItAlIst order of magnitude Between primitive society founded on a natural economy in which production is limited to use values destined for self-consumption by their producers, and capitalist society, there stretches a long period in human history, embracing essentially all human civilisations, which came to a halt before reaching the frontiers of capitalism.Marxism defines them as societies in which small-scale commodity production prevailed. A society of th is kind is already familiar with the production of commodities, of goods designed for exchange on the market and not for direct consumption by the producers, but such commodity production has not yet become generalised, as is the case in capitalist society. In a society founded on small-scale commodity production, two kinds of economic operations are carried out.The peasants and artisans who bring their products to market wish to sell goods whose use value they themselves cannot use in order to obtain money, means of exchange, for the acquisition of other goods, whose use value is either necessary to them or deemed more important than the use value of the goods they own. The peasant brings wheat to the marketplace which he sells for money with this money he buys, let us say, cloth. The artisan brings his cloth to the market, which he sells for money with this money he buys, let us say, wheat.What we have here, then, is the operation selling in order to buy . C ommodityMoneyCommodity , C MC w hich has this essential character the value of the two extremes in this formula is, by definition, exactly the same. But within small-scale commodity production there appears, alongside the artisan and small peasant, another personage, who executes a different kind of economic operation. Instead of selling in order to buy, he buys in order to sell. This type of person goes to market without any commodities he is an owner of money.Money cannot be sold but it can be used to buy, and that is what he does buys in order to sell, in order to resell MCM. There is a fundamental difference between the two types of operation. The 24 An IntroductIon to MArxIst EconoMIc thEory second operation makes no sense if upon its completion we are confronted by exactly the same value as we had at the beginning. No one buys a commodity in order to sell it for exactly the same price he paid for it. The operation buy in order to sell makes sense only if the sale brings a supplementary value, a surp lus value.That is why we state here, by way of definition. M is greater than M and is made up of M+m m being the surplus value, the amount of increase in the value of M. We now define capital as a value which is increased by a surplus value, whether this occurs in the course of commodity circulation, as in the example just given, or in production, as is the case in the capitalist system. Capital, therefore, is every value which is augmented by a surplus value it therefore exists not only in capitalist society but in any society founded on small-scale commodity production as well.For this reason it is necessary to distinguish very clearly between the life of capital and that of the capitalist mode of production, of capitalist society. Capital is far older than the capitalist mode of production. The former probably goes back some 3000 years, whereas the latter is barely 200 years old. What form does capital take in precapitalist society? It is basically usury capital and merchant or commercial capital. The passage from precapitalist society into capitalist society is characterised by the penetration of capital into the sphere of production.The capitalist mode of production is the first mode of production, the first form of social organisation, in which capital is not limited to the sole role of an intermediary and exploiter of non-capitalist forms of production, of small-scale commodity production. In the capitalist mode of production, capital takes over the means of production and penetrates directly into production itself. orIgIns of thE cApItAlIst ModE of productIon What are the origins of the capitalist mode of production?What are the origins of capitalist society as it has developed over the past 200 years? They lie first of all in the separation of the producers from their means of production. Subsequently, it is the establishment of these means of production as a monopoly in the hands of a single social class, the bourgeoisie. And finally, it is the appe arance of another social class which has been separated from its means of production and therefore has no other resources for its subsistence than the sale of its labour-power to the class which has monopolised the means of production.Let us consider each of these origins of the capitalist mode of production, which are at the same time the fundamental characteristics of the capitalist Capital and Capitalism 25 system as well. First characteristic separation of the producer from his means of production. This is the fundamental condition for existence of the capitalist system but it is also the one which is generally the most poorly understood. Let us use an example which may seem paradoxical since it is taken from the early Middle Ages, which was characterised by serfdom.We know that the mass of peasant-producers were serfs bound to the soil. But when we say that the serf was bound to the soil, we imply that the soil was also bound to the serf, that is, he belonged to a social class which always had a base for supplying its needs, enough land to work so that the individual serf could meet the needs of a household even though he worked with the most primitive implements. We are not viewing people condemned to death by starvation if they do not sell their labour-power.In such a society, there is no economic compulsion to hire out ones arms, to sell ones labour-power to a capitalist. We can express this another way by stating that the capitalist system cannot develop in a society of this kind. This general truth also has a modern application in the way colonialists introduced capitalism into the African countries during the 19th and early 20th centuries. Let us look at the livin