Howdy! I have just wrote this text after being forced to solve some stupid exams about Das Kapital at college... I realized that the Marxist system is actually more stupid than I thought... Want to know why? Look downwards...
At the portuguese version of this post I quoted some nice sources of info about the Marxist system, take a look if you get interested.
The Marxist System and Its Absurdities
Author – Rafael Hotz
Observation:
Author – Rafael Hotz
Observation:
I will use the terms “capitalist” and “capitalism” just by convenience, and to designate an economic system completely free in which the labor force is a tradable commodity.
Short Marxist System’s Summary
The Marxist system is based in it’s version of the labor theory of value. In this system, the exchange-value of the commodities is determined by the abstract socially necessary labor time materialized on them. By socially necessary Marx refers to the labor time necessary to the production of a unit of the particular good in the prevailing labor and skill conditions in a given point in time:
“A use value, or useful article, therefore, has value only because human labor in the abstract has been embodied or materialized in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labor, contained in the article. The quantity of labor, however, is measured by its duration, and labor time in its turn finds its standard in weeks, days, and hours.”
“The labor time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time.”(Das Kapital, Volume I)
So, the value of the labor force itself is the quantity of socially necessary labor time needed to the products that guarantee the workers’ subsistence, i.e., it’s reproduction in the system:
“The value of labor-power is determined, as in the case of every other commodity, by the labor-time necessary for the production, and consequently also the reproduction, of this special article. So far as it has value, it represents no more than a definite quantity of the average labor of society incorporated in it. Labor-power exists only as a capacity, or power of the living individual. Its production consequently pre-supposes his existence. Given the individual, the production of labor-power consists in his reproduction of himself or his maintenance. For his maintenance he requires a given quantity of the means of subsistence. Therefore the labor-time requisite for the production of labor-power reduces itself to that necessary for the production of those means of subsistence; in other words, the value of labor-power is the value of the means of subsistence necessary for the maintenance of the laborer.”(Das Kapital, Volume I)
To Marx, exchanges take place between equal values [1]:
“Exchange,” he says, “cannot take place without equality, and equality not without commensurability".(Das Kapital, Volume I, quoting Aristotle)
The labor force is the only source capable of “aggregating value” to the goods in the Marxist system. However, in capitalism, the capitalists would make the workers to labor more time than that required to their reproduction. This not paid labor time is supposed to be appropriated just by the capitalist and corresponds to a surplus-value. Hence, capitalism is exploitative under the Marxist optic:
“Suppose that a capitalist pays for a day’s labor-power at its value; then the right to use that power for a day belongs to him, just as much as the right to use any other commodity, such as a horse that he has hired for the day. To the purchaser of a commodity belongs its use, and the seller of labor-power, by giving his labor, does no more, in reality, than part with the use-value that he has sold. From the instant he steps into the workshop, the use-value of his labor-power, and therefore also its use, which is labor, belongs to the capitalist. By the purchase of labor-power, the capitalist incorporates labor, as a living ferment, with the lifeless constituents of the product. From his point of view, the labor-process is nothing more than the consumption of the commodity purchased, i. e., of labor-power; but this consumption cannot be effected except by supplying the labor-power with the means of production. The labor-process is a process between things that the capitalist has purchased, things that have become his property. The product of this process belongs, therefore, to him, just as much as does the wine which is the product of a process of fermentation completed in his cellar.”(Das Kapital, Volume I)
From this follows that as big the proportion between variable capital (labor force) utilized in the production, bigger shall be the quantity of surplus-value obtained, and also the profit rate (surplus-value divided by the total capital invested).
In the Marxist literature, the ratio between constant capital (capital that is unable to aggregate value and comprehends everything but the labor force) and variable capital is called capital’s organic composition. In the Marxist system it varies with the productive sector.
In the Marxist literature, the ratio between constant capital (capital that is unable to aggregate value and comprehends everything but the labor force) and variable capital is called capital’s organic composition. In the Marxist system it varies with the productive sector.
The Fundamental Puzzle
Marx, in Das Kapital’s Volume III, is confronted with a significant puzzle. So far, he supposed that the surplus-value obtained in his theoretical system is the same among the different activities. As we have already said, the proportion between variable and constant capital varies according to the different economic sectors. However, the profit rate, that was supposed to vary according to the organic composition, has a tendency to equality (alert entrepreneurs would shift resourced from less to more profitable sectors):
"We have thus shown that in different branches of industry varying rates of profit are obtained according to the differences in the organic composition of the capitals, and also, within given limits, according to their periods of turnover; and that, therefore, even with equal rates of surplus value, there is a law (or general tendency), although only for capitals possessing the same organic composition, – the same periods of turnover being assumed – that the profits are in proportion to the amounts of the capitals, and therefore equal amounts or capital yield in equal periods of time equal amounts of profit. The argument rests on the basis which has hitherto generally been the basis of our reasoning, that commodities are sold according to their values. On the other hand, there is no doubt that, in reality, not reckoning unessential, accidental, and self-compensating differences, the difference in the average rate of profit for different branches of industry does not exist and could not exist without upsetting the whole system of capitalist production. It appears therefore that here the theory of value is irreconcilable with the actual movement of things, irreconcilable with the actual phenomena of production, and that, on this account, the attempt to understand the latter must be given up. (iii. 131).”(Das Kapital, Volume III, quoted in Eugen Bohm-Bawerk’s “Karl Marx And The Close Of His System”)
This problem has led Marx to propose that the commodities are not exchanged according to their values in the capitalist system, but rather according to their prices of production. The task of finding the prices of production is known as “transformation problem” in the Marxist literature. Although there’s a big debate about this issue, we will focus only on the solution given by Marx on his third volume.
To Marx, the value of the commodities (labor values) would be transformed in prices of production multiplying the first by the system’s average profit rate. This average profit rate would be calculated dividing the whole system’s surplus value mass (total quantity of non paid labor hours) by the total value of the capital employed in the system. As says Marx:
To Marx, the value of the commodities (labor values) would be transformed in prices of production multiplying the first by the system’s average profit rate. This average profit rate would be calculated dividing the whole system’s surplus value mass (total quantity of non paid labor hours) by the total value of the capital employed in the system. As says Marx:
"the values change into prices of production" (e.g., iii. 176).(Das Kapital, Volume III, quoted in Eugen Bohm-Bawerk’s “Karl Marx And The Close Of His System”)
The result of this transformation is that the profit rate equals itself among the diverse sectors of the economy (satisfying the system’s empirical evidence). Another result of such transformation is that some commodities are exchanged above and some under its value.
For our little essay, this comprehension of capitalism, as Marx suggested it, is enough to analyze the consequences of applying his vision to the labor market.
For our little essay, this comprehension of capitalism, as Marx suggested it, is enough to analyze the consequences of applying his vision to the labor market.
The Fundamental Puzzle, Labor Force Acquisition and the Absurdity
Before anything else, let’s abstract the wage differences caused by the different categories of labor sold, and consider then the reasoning under the very categories (i.e., we will not compare doctor’s labor force with, by instance, cookers’ labor force, but doctor’s labor force with its similar).
Now, let’s see the consequences of postulating that the labor force is bought at its price of production, not at its labor value.
This implies that part of the labor force is bought above its own value and some of it below. There would be surplus-value redistribution among the very worker’s class. But the logical consequences of this conclusion to the Marxist system are absurd.
First, if part of the labor force is remunerated above its value, it is receiving resourced that are beyond the necessary for its own survival. With this, it would be possible for them to accumulate resources, centralize (or not) them and become capitalists themselves. So, capital would no be a perpetual relation as desires Marx. The very capitalist system would guarantee “liberation” to the workers that received wages above their values.
However, the Marxist system demands that part of the labor force is remunerated under its value. But the labor force value consists in its cost of reproduction. If it is remunerated under its value, it could even survive! In the Marxist system, part of the labor force should be constantly languishing by inanition.
Now let’s think about the two tendencies operating simultaneously in time. A part of the labor force gets more and more miserable, towards a situation in which it could not even subsist. Meanwhile, the other part of the labor force becomes itself capitalist, due to the accumulation of resources redistributed from the other labor force’s fraction.
And what is our final result? The very source of the capitalist surplus-value would extinguish itself. Some of it would starve, and the other part would rise to the status of rival in the system (in the capitalist’s point of view). And who would produce? We could think of two situations: (1) there would be no more labor market, the capitalists proprietors would produce themselves and would exchange their products on the market; or (2) some capitalists still wanting to realize “surplus-value” would offer wages to more poor capitalists. But this capitalists who wish to hire labor force would have to offer sums above what could be gained at independent production and exchange, i.e., it would be impossible to extract surplus value. This “labor force buyers” would be just buying the good leisure.
Still more ahead in time, ceteris paribus, if we follow option (2), the income between the poorer and richer capitalists would become equal in wealth, once that the wages paid are always higher (those who get the “extra wage” would also, in the future, be able to demand “leisure”)!
In short, there we have the great absurdities that the development of the Marxist system affirms: it tells us that it we permit the existence of a labor market, we would inexorably have a tendency to (1) a death of a great part of the labor force, followed from (2) the end of the wage system and (3) a possible total voluntary equalization of income.
Now, let’s see the consequences of postulating that the labor force is bought at its price of production, not at its labor value.
This implies that part of the labor force is bought above its own value and some of it below. There would be surplus-value redistribution among the very worker’s class. But the logical consequences of this conclusion to the Marxist system are absurd.
First, if part of the labor force is remunerated above its value, it is receiving resourced that are beyond the necessary for its own survival. With this, it would be possible for them to accumulate resources, centralize (or not) them and become capitalists themselves. So, capital would no be a perpetual relation as desires Marx. The very capitalist system would guarantee “liberation” to the workers that received wages above their values.
However, the Marxist system demands that part of the labor force is remunerated under its value. But the labor force value consists in its cost of reproduction. If it is remunerated under its value, it could even survive! In the Marxist system, part of the labor force should be constantly languishing by inanition.
Now let’s think about the two tendencies operating simultaneously in time. A part of the labor force gets more and more miserable, towards a situation in which it could not even subsist. Meanwhile, the other part of the labor force becomes itself capitalist, due to the accumulation of resources redistributed from the other labor force’s fraction.
And what is our final result? The very source of the capitalist surplus-value would extinguish itself. Some of it would starve, and the other part would rise to the status of rival in the system (in the capitalist’s point of view). And who would produce? We could think of two situations: (1) there would be no more labor market, the capitalists proprietors would produce themselves and would exchange their products on the market; or (2) some capitalists still wanting to realize “surplus-value” would offer wages to more poor capitalists. But this capitalists who wish to hire labor force would have to offer sums above what could be gained at independent production and exchange, i.e., it would be impossible to extract surplus value. This “labor force buyers” would be just buying the good leisure.
Still more ahead in time, ceteris paribus, if we follow option (2), the income between the poorer and richer capitalists would become equal in wealth, once that the wages paid are always higher (those who get the “extra wage” would also, in the future, be able to demand “leisure”)!
In short, there we have the great absurdities that the development of the Marxist system affirms: it tells us that it we permit the existence of a labor market, we would inexorably have a tendency to (1) a death of a great part of the labor force, followed from (2) the end of the wage system and (3) a possible total voluntary equalization of income.
Notes
[1] Actually this mistake is committed since Aristotle. In reality, value is a subjective appreciation that the individuals grant to some particular thing, after comparing it with other(s). The exchanges take place when we do have a double inequality of value, i.e., when both parties grant more value to what is being received, compared with what is renounced.
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