Contents
Version History
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Version
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Date
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Comments
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Draft
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31-May-2012
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Initial Draft
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V0.1
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18-May-2013
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Updated Section 8. The
accumulation of capital & Crisis
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While celebrating Karl Marx’s 194th
birthday (Marx born on May 5th 1818), I’d like to share some
fundamental economic and social aspects of Marxist philosophy. In this article
I’ve shared what I’ve read from a small book which consists of articles written
by Lenin. Lenin is one of the best teachers of Marxism. I’ve given example with
respect to IT industry ( will be updated, corrected by all our members). This
article starts with economical doctrine of Marxism and touch upon the strategy
and tactics to achieve socialism.
Fundamental Understanding and Basic Questions
Everyone
is working in order to produce products or provide services to other people and
for themselves. What someone produces is changed with someone else produced. Marx’s
economic theory is analyzing how is production is organized and exchange is
arranged (of course in the capitalist system).
Marx’s Economic
Doctrine
Lenin says, “Marx’s economic doctrine is the most profound, comprehensive
and detailed confirmation and application of his theory”
A
commodity is, in the first place, a thing that satisfies a human want; in the
second place, it is a thing that can be exchanged for another thing. The
utility of a thing makes is a use-value.
A Software application has a use
value. For example , word processor has a use value of editing a document for
any purpose. Complier software has a use value of compiling a program written
in high level language and generating a machine code.
Exchange-value
(or, simply, value), is first of all the ratio, the proportion, in which a
certain number of use-values of one kind can be exchanged for a certain number
of use-values of another kind.
We are practiced to mean always
exchange value as value. That’s why Lenin too mention as Exchange-value (or,
simply, value) in the above para ! 5
word processors may be exchanged for 2 compilers.
What
is there in common between these various things, things constantly equated with
one another in a definite system of social relations? Their common feature is
that they are products of labor. In exchanging products, people equate the most
diverse kinds of labor. The production of commodities is a system of social
relations in which individual producers create diverse products (the social
division of labor), and in which all these products are equated with one
another in the process of exchange. Consequently, what is common to all
commodities is not the concrete labor of a definite branch of production, not
labor of one particular kind, but abstract
human labor—human labor in general.
When a company is producing a car,
people from different areas are involved. Automobile engineers, interior designers,
hardware and software engineers , men working in the assembly line etc.
Everyone puts their labor. So car includes labor from all these people, a
division of labor, what is called as social division of labor. When we measure
a car against the labor it can’t of represented as x time of engineers labor, y
time of men in assembly etc, but a total or general labor. We should NOT
measure the labor independently since the labor is abstract(for our
understanding we can say general or total, Marx refer this as abstract labor). We,
the software and hardware engineers, are part of this very social division of
labor in producing commodities for the society.
All
the labor power of a given society, as represented in the sum total of the
values of all commodities, is one and the same human labor power. Thousands
upon thousands of millions of acts of exchange prove this. Consequently, each
particular commodity represents only a certain share of the socially necessary
labor time. The magnitude of value is determined by the amount of socially necessary
labor, or by the labor time that is socially necessary for the production of a
given commodity, of a given use-value.
Total
labor spent in creating commodities for the entire society is defined as
socially necessary labor. Please understand it plainly/simply, need NOT to
think about exchange, profit, wage etc. Food grains, cereals, cloth, laptop,
mobiles, shoes, etc are produced in million and million every day and total
labor absorbed to produce it called socially necessary labor. Every men/women
part of society put his/her labor to produce commodities for others and for
themselves.
Marx writes, “As values, all commodities are only definite
masses of congealed labor time.”
Every person exchanges his labor
for someone’s labor. Then what makes this process so complicated and why people
are NOT able to comprehend this exchange of labor, answer is money. Money has
become a general commodity.
As
the highest product of the development of exchange and commodity production,
money masks, conceals, the social character of all individual labor, the social
link between individual producers united by the market. Marx analyzes the
various functions of money in very great detail; it is important to note here
in particular (as in the opening chapters of Capital in general) that what
seems to be an abstract and at times purely deductive mode of exposition deals
in reality with a gigantic collection of factual material on the history of the
development of exchange and commodity production.
“If we consider
money, its existence implies a definite stage in the exchange of commodities.
The particular functions of money, which it performs either as the mere
equivalent of commodities or as means of circulation, or means of payment, as
hoard or as universal money, point, according to the extent and relative
preponderance of the one function or the other, to very different stages in the
process of social production.”, Marx.
At
a certain stage in the development of commodity production money becomes
transformed into capital. The formula of commodity circulation was C-M-C
(commodity—money—commodity)—i.e., the sale of one commodity for the purpose of
buying another. The general formula of capital, on the contrary, is M-C-M—i.e.,
the purchase for the purpose of selling (at a profit).
The
increase over the original value of the money
that is put into circulation is called by Marx surplus value(bold by me). The fact of this “growth” of money in
capitalist circulation is common knowledge. Indeed, it is this “growth” which
transforms money into capital, as a
special and historically determined social relation of production(bold by
me). Surplus value cannot arise out
of commodity circulation, for the latter knows only the exchange of
equivalents; neither can it arise out of price increases, for the mutual losses
and gains of buyers and sellers would equalize one another, whereas what we
have here in not an individual
phenomenon but a mass, average and social phenomenon(bold by me). To obtain
surplus value, the owner of money “must ... find... in the market a commodity,
whose use-value possesses the peculiar property of being a source of value”
[Capital]—a commodity whose process of consumption is at the same time a
process of the creation of value. Such a commodity exists—human labor power.
Its consumption is labor, and labor creates value. The owner of money buys
labor power at its value, which, like the value of every other commodity, is
determined by the socially necessary labor time requisite for its production
(i.e., the cost of maintaining the worker and his family). Having bought enough
labor power, the owner of money is entitled to use it, that is, to set it to
work for a whole day—12 hours, let us say. Yet, in the course of six hours
(“necessary” labor time) the worker creates product sufficient to cover the
cost of his own maintenance; in the course of the next six hours (“surplus”
labor time), he creates “surplus” product, or surplus value, for which the
capitalist does not pay.
Therefore,
from the standpoint of the process of production, two parts must be
distinguished in capital: constant capital, which is expended on means of
production (machinery, tools, raw materials, etc.), whose value, without any
change, is transferred (immediately or part by part) to the finished product;
secondly, variable capital, which is expended on labor power. The value of this latter capital is not
invariable, but grows in the labor process, creating surplus value(bold by
me). Therefore, to express the
degree of capital’s exploitation of labor power, surplus must be compared not
with the entire capital but only with variable capital. Thus, in the example
just given, the rate of surplus value, as Marx calls this ratio, will be 6:6,
i.e., 100 per cent.
There
are two main ways of increasing surplus value: lengthening the working day
(“absolute surplus value”), and reducing the necessary working day (“relative
surplus value”). In analyzing the former, Marx gives a most impressive picture
of the struggle of the working class for a shorter working day and of
interference by the state authority to lengthen the working day (from the 14th
century to the 17th) and to reduce it (factory legislation in the 19th
century).
IT employees working hours are NOT
regulated despite there are polices regarding working hours in IT companies.
Since IT industries comes under essential service its free from many labor
laws. The working class fought for 8 hours working day and won it. Now people
in IT are working more than 12 or 16 hours a day. Fighting individually will
NOT work out as the capitalism as whole maintains ‘the reserved army’ of
workers , the IT companies maintains internal ‘reserved army’, free poll ,
batch , buffer etc. Working 12 or 16 hours a day taking back them in the
history NOT taking them forward.
Analyzing
the production of relative surplus value, Marx investigates the three
fundamental historical stage in capitalism’s increase of the productivity of
labor:
(1)
simple co-operation;
(2)
the division of labor, and manufacture;
(3)
machinery and large-scale industry.
To
continue. New and important in the highest degree is Marx’s analysis of the
accumulation of capital—i.e., the transformation of a part of surplus value
into capital, and its use, not for satisfying the personal needs of whims of
the capitalist, but for new production. Marx revealed the error made by all
earlier classical political economists (beginning with Adam Smith), who assumed
that the entire surplus value which is transformed into capital goes to form
variable capital. In actual fact, it is divided into means of production and
variable capital. Of tremendous importance to the process of development of
capitalism and its transformation into socialism is the more rapid growth of
the constant capital share (of the total capital) as compared with the variable
capital share.
Here a question will rise
automatically, when the capitalist expand his production, he should have new
machines, new infrastructure etc. Anyway he needs people to work in it. So
employing the people and expanding the means of production is mutually
dependent. I too have this question, look for an answer. Answer to the above question is dealt in
Capital Vol 2 Part III, ‘The Reproduction and Circulation of the Aggregate
Social Capital’. It deals with how much portion of the profit ( or surplus ) is
converted into constant capital and how much into variable capital (ie wages)
See Appendix B
One thing is clear, means of
producing software applications is another software. We need compilers to
develop applications, we need operating systems to install compilers. The OS
and the compilers are master machines where the investment is one time(labor to
upgrade is ignored here since it’s maintained by a community in free software
case). There is human labor while writing applications using these master
software .Since the Free software make
this mean of production itself free(valueless) it challenge the capitalist mode
of production uprightly.
By
speeding up the supplanting of workers by machinery and by creating wealth at
one extreme and poverty at the other, the accumulation of capital also gives
rise to what is called the “reserve army of labor”, to the “relative surplus”
of workers, or “capitalist overpopulation”, which assumes the most diverse
forms and enables capital to expand production extremely rapidly.
<
How it expands the production? Is it possible to expand the production without
employing the people? I too hear from my
friends in a Western European country a steel industry producing multiple ton
of steel plates in a day is employed by just 4 engineers. Need more analysis>
In conjunction with credit facilities
and the accumulation of capital in the form of means of production, this
incidentally is the key to an understanding of the crises of
overproduction which occur periodically in capitalist countries—at first at an
average of every 10 years, and later at more lengthy and less definite
intervals.
The
“historical tendency of capitalist accumulation” is described by Marx in the
following celebrated words:
“The
expropriation of the immediate producers is accomplished with merciless
vandalism, and under the stimulus of passions the most infamous, the most
sordid, the pettiest, the most meanly odious. Self-earned private property [of
the peasant and handicraftsman], that is based, so to say, on the fusing
together of the isolated, independent laboring-individual with the conditions
of his labor, is supplanted by capitalistic private property, which rests on
exploitation of the nominally free labor of others.... That which is now to be
expropriated is no longer the laborer working for himself, but the capitalist
exploiting many laborers. This expropriation is accomplished by the action of
the immanent laws of capitalistic production itself, by the centralization of
capital. One capitalist always kills many. Hand in hand with this
centralization, or this expropriation of many capitalists by few, develop, on
an ever extending scale, the co-operative form of the labor process, the
conscious technical application of science, the methodical cultivation of the
soil, the transformation of the instruments of labor into instruments of labor
only usable in common, the economizing of all means of production by their use
as the means of production of combined, socialized labor, the entanglement of
all people in the net of the world market, and with this the international
character of the capitalistic regime. Along with the constantly diminishing
number of the magnates of capital, who usurp and monopolize all advantages of
this process of transformation, grows the mass of misery, oppression, slavery,
degradation, exploitation; but with this too grows the revolt of the working
class, a class always increasing in
numbers, and disciplined, united, organized by the very mechanism of the
process of capitalist production itself(bold be me). The monopoly of
capital becomes a fetter upon the mode of production, which has sprung up and
flourished along with, and under, it. Centralization of the means of production
and socialization of labor at last reach a point where they become incompatible
with their capitalist integument. The integument is burst asunder. The knell of
capitalist private property sound. The expropriators are expropriated.”
(Capital, Volume I)
New
and important in the highest degree is the analysis Marx gives, in Volume Two
of Capital of the reproduction of aggregate social capital. Here, too, Marx
deals, not with an individual phenomenon but with a mass phenomenon; not with a
fractional part of the economy of society, but with that economy as a whole.
Correcting
the aforementioned error of the classical economists, Marx divides the whole of
social production into two big sections:
(I)
production of the means of production, and
(II)
production of articles of consumption,
In Free software too we deal with
the software as means of production and software articles for consumption. How
the software is produced determines the method how it’ll be consumed. < This
can be expanded into full details by explaining the political economy of
software>
average rate of
profit, social economy as a whole & profit
Volume
Three of Capital solves the problem of how the average rate of profit is formed
on the basis of the law of value. This immense stride forward made by economic
science in the person of Marx consists in his having conducted an analysis,
from the standpoint of mass economic phenomena, of the social economy as a
whole, not from the standpoint of individual cases or of the external and
superficial aspects of competition, to which vulgar political economy and the
modern “theory of marginal utility”( The Theory of Marginal
Utility—An economic theory that originated in the 1870s to
counteract Marx’s theory of value. According to this theory, the value of
commodities is estimated by their usefulness and not the amount of social labor
expended on their production)
frequently restrict themselves. Marx first analyzes the origin of surplus
value, and then goes on to consider its division into profit, interest, and
ground rent. Profit is the ratio between surplus value and the total capital
invested in an undertaking. Capital with a “high organic composition” (i.e.,
with a preponderance of constant capital over variable capital in excess of the
social average) yields a rate of profit below the average; capital with a “low
organic composition” yields a rate of profit above the average. Competition
among capitalists, and their freedom to transfer their capital from one branch
to another, will in both cases reduce the rate of profit to the average.
The
sum total of the values of all the commodities in a given society coincides
with the sum total of the prices of the commodities, but, in individual undertakings and branches of production, as a result of
competition, commodities are sold not at their values at the prices of
production (or production prices), which are equal to the capital expended plus
the average profit.
< bolded text in the above para
has to be discussed and expanded accordingly. My understanding is that when the
a commodity ‘A’ is produced by putting together the commodities a1, a2 and a3
which are produced in the different braches prices of a1, a2 and a3 is NOT
capital expended + the average profit. If so what determines the price (or
exchange values of a1, a2 and a3) >
In
this way, the well-known and indisputable fact of the divergence between prices
and values and of the equalization of profits is fully explained by Marx on the
basis of law of value, since the sum total of values of all commodities
coincides with the sum total of prices. However, the equating of (social) value
to (individual) prices does not take place simply and directly, but in a very
complex way. It is quite natural that in a society of separate producers of
commodities, who are united only by the market, a conformity to law can be only
an average, social, mass manifestation, with individual deviations in either
direction mutually compensating one another.
The above para has to be
experienced by every worker rather understanding it! I feel it’s the epitome of
Marx’s economic doctrine.
A
rise in the productivity of labor implies a more rapid growth of constant
capital as compared with variable capital. Inasmuch as surplus value is a
function of variable capital alone, it is obvious that the rate of profit (the
ratio of surplus value to the whole capital, not to its variable part alone)
tends to fall. Marx makes a detailed analysis of this tendency and of a number
of circumstances that conceal or counteract it. Without pausing to deal with
the extremely interesting sections of Volume Three of Capital, Vol. I devoted
to usurer’s capital, commercial capital and money capital, we must pass on to
the most important section—the theory of ground rent.
Under
capitalism, the “exploitation of the peasant differs only in form from the
exploitation of the industrial proletariat. The exploiter is the same: capital.
The individual capitalists exploit the individual peasant through mortgages and
usury; the capitalist class exploits the peasant class through the state
taxes.” [The Class Struggles in France]
BUT in India there is no tax for
money earned through agriculture production for individual or farmers either
big landlords or medium scale peasants or small peasants , capital in
agriculture, rate of return in agriculture and agriculture in Indian conditions
etc have to be dealt in a separate
tutorial. Prices of agricultural commodities, organic nature of agricultural
labor their movement into Industry also will be included in a separate tutorial
or can be added in the same tutorial.
Many of our comrades have a valid
question something similar to why the people from middle class has considerable
presence in the party and whether ‘complete’ working class should become
revolutionaries to bring out the socialist revolution, I’d like to mention 2
sections one from Marxism and Revisionism by Lenin and second from The
Marx-Engels Correspondence by Lenin.
[Marxism
and Revisionism] Wherein lies its inevitability in capitalist society? Why is
it more profound than the differences of national peculiarities and of degrees
of capitalist development? Because in every capitalist country, side by side
with the proletariat, there are always broad strata of the petty bourgeoisie,
small proprietors. Capitalism arose and is constantly arising out of small production.
A number of new “middle strata” are inevitably brought into existence again and
again by capitalism (appendages to the factory, work at home, small workshops
scattered all over the country to meet the requirements of big industries, such
as the bicycle and automobile industries, etc.). These new small producers are
just as inevitably being cast again into the ranks of the proletariat. It is
quite natural that the petty-bourgeois world-outlook should again and again
crop up in the ranks of the broad workers’ parties. It is quite natural that
this should be so and always will be so, right up to the changes of fortune
that will take place in the proletarian revolution. For it would be a profound
mistake to think that the “complete” proletarianisation of the majority of the
population is essential for bringing about such a revolution.
[The
Marx-Engels Correspondence]
“Miracles
are happening here in Elberfeld. Yesterday [this was written on February 22,
1845], we held our third communist meeting in the largest hall and the best
restaurant of the city. The first meeting was attended by 40 people, the second
by 130 and the third by at least 200. The whole of Elberfeld and Barmen, from
the moneyed aristocracy to the small shopkeepers, was represented, all except
the proletariat.” This is literally what Engels wrote. Everybody in Germany at
that time was a Communist—except the proletariat. Communism was a form of
expression of the opposition sentiments of all, and chiefly of the bourgeoisie.
“The most stupid, the most lazy and most philistine people, who take no
interest in anything in the world, are almost becoming enthusiastic over
communism.”[5] The chief preachers of communism at that time were people of the
type of our Narodniks, “Socialist-Revolutionaries”, “Popular Socialists”,[6]
and so forth, that is to say, well-meaning bourgeois, some to a greater, others
to a lesser degree, furious with the government.And under such conditions,
amidst countless pseudo-socialist trends and factions, Engels was able to find
his way to proletarian socialism, without fearing to break off relations with a
mass of well-intentioned people, who were ardent revolutionaries but bad
Communists.
Process
of reproduction and how surplus is divided as constant and variable capital can
be easily understood by reading a letter from Marx to Engels dated 6th
July 1863 in which the above table is also attached.
