1. the Influence of Ricardo, the Socialists, Darwin, Hegel and Feuerbach on Marx S Thought

Chapter 10: Marx

1. The influence of Ricardo, the socialists, Darwin, Hegel and Feuerbach on Marx’s thought

He was intrigued by Ricardo’s Labor Theory of Value, but he felt that it had several shortcomings, so he proceeded to sketch his own labor theory. The socialists also had an influence on him; he shared their moral outrage against contemporary capitalism, their sharp criticism of classical political economy and their socialist vision of the future; however he felt that socialism would not rise until the conditions of the working class deteriorated to the point of open rebellion. Marx read Darwin’s book and saw parallels in it with his own thinking on political economy, thus reinforcing Marx’s perspective that dynamic (as opposed to static analysis is the route to true understanding). He was also greatly influenced by Georg Hegel’s notion of dialectical process; he modified it and used it to formulate his own theory of historical materialism. It can be said that his theory was a combination of Hegel’s notion of dialectic process with a modified version of Ludwig Feuerbach’s concept of philosophical materialism (from his book: Essence of Christianity). Marx and Feuerbach emphasized materialism (that is: the importance of material realities as opposed to Hegel’s idealism).

2. The forces of production, the relations of production, and the internal contradictions of capitalism (class struggle) which inevitably lead to revolution

The sum of Marx’s theory of history is that history is a process through which the static relations of production (the Thesis) come into eventual conflict with the dynamic forces of production (the Antithesis) which results in conflict (that conflict in turn) revolutionizes the system so that new relations of production (synthesis and new thesis) usher in the higher development of the forces of production. In essence his theory postulates that the mechanism for overthrowing old societies is class struggle. Marx analyzed capitalism and came to the conclusion that although it caused a great increase in productivity and production it had internal contradictions that would produce class struggle and its eventual overthrow. The “internal contradictions” are that the techniques of production under capitalism become increasingly concentrated and centralized and the system of private ownership of capital becomes a barrier to further progress. Unemployment increases, the working class become frustrated, their condition deteriorates to the point of open rebellion. The revolt is followed by the establishment of socialism.

Exam Question: Explain Marx’s theory of History relating it to the earlier ideas of Hegel and Feuerbach

The sum of Marx’s theory of history is that history is a process through which the static relations of production (the Thesis) come into eventual conflict with the dynamic forces of production (the Antithesis) which results in conflict (that conflict in turn) revolutionizes the system so that new relations of production (synthesis and new thesis) usher in the higher development of the forces of production. In essence his theory postulates that the mechanism for overthrowing old societies is class struggle

He was also greatly influenced by Georg Hegel’s notion of dialectical process; he modified it and used it to formulate his own theory of historical materialism. It can be said that his theory was a combination of Hegel’s notion of dialectic process with a modified version of Ludwig Feuerbach’s concept of philosophical materialism (from his book: Essence of Christianity). Marx and Feuerbach emphasized materialism (that is: the importance of material realities as opposed to Hegel’s idealism).

3. The six stages of capitalist production which eventually culminate in communism

SKIPPED???????????(I’m not sure if it’s the stages mentioned on page 186-187or the concepts mentioned under the topic: “Law of motion” of capitalist society)

4. The similarities and differences between Marx’s and Ricardo’s labor theory of value

Differences: To Marx the average labor time socially necessary to produce a commodity determines its absolute value; Ricardo on the other hand believed that the relative values of different commodities are proportional to the labor time embodied within each.

Similarities: Marx like Ricardo measures value in labor hours and they both determined exchange value by labor cost measured in labor time.

5. The foundational idea of Marx’s theory of exploitation: Only labor is productive and only labor deserves a reward

Marx believed that the one commodity that can create a value greater than its own is labor power, so he reasoned that the capitalists receive a profit by purchasing this labor power.

Exam question: Why according to Marx capitalist exploit laborers

According to Marx all commodities sell at their value and thus to make a profit capitalists had to purchase a commodity that can create value greater than its own (labour) exploitation only arise when workers can produce more in a day than they must consume in order to maintain themselves and their families. Employers (capitalists) pay the worker the full market value of their labour power but the daily pay equals only part of the value the labourers create, thus there is a surplus this surplus is then the profit for the capitalist while the laborers are exploited. 6. The degree to which capital entrepreneurship and nature (land) can be regarded as productive.

In Marx’s theory of exploitation capital, entrepreneurship and nature are implicitly assumed not to make any productive contribution at all because according to him only labor is productive, but labor in itself does not create value. It is clear that entrepreneurship, capital and land do make a productive contribution. Entrepreneurs mobilize and coordinate labor, material and implements in such a way that the eventual product can actually be sold at a profit. Land yields its rewards in cooperation with labor; these rewards cannot be attributed solely to labor. Capital also makes a productive contribution, (for example when viewed as “money capital” no investor would be willing to risk their money for nothing.

7. Marx’s concept of “socially necessary labor time” and its components

The socially necessary labor time includes 1 the direct labor in producing the commodity, 2 the labor embodied in the machinery and raw materials that are used up during the process of production, 3and the value transferred to the commodity during this process.

Suppose the average labor time contained in a pair of shoes is 10 hours. This average socially necessary labor determines the value of the shoes. If a worker is incompetent or lazy and takes 20 hours to produce a pair of shoes, its value is still only 10 hours. Suppose a worker or an employer leads the field in technology and efficiency and a pair of shoes is produced with 5 hours labor, its value is nevertheless 10 hours.

8. Marx’s concepts of “labor power” and “labor time” and how the value of labor power is determined (EXAM QUESTION)

Labor power: refers to a person’s ability to work and produce commodities, it is what the capitalist needs to make profits. The value of labor power is determined by the socially necessary labor time required to produce the cultural necessities of life consumed by the laborers and their families. If these necessities could be produced in 4 hours per day, the value of the commodity labor power would be 4 hours of labor time per day. If the productivity of labor doubled so that the necessities could be produced in 2 hours per day, that would mean that the value of labor power would fall by 50%

Labor time: refers to the actual process and duration of work. 9. The extraction of surplus value by capitalists: their power to set the length of the working day

The exploitation of workers –the extraction of surplus value by capitalists. According to Marx, exploitation of labor arises only when workers can produce more in a day than they must consume in order to maintain themselves and their families. Then employers pay the workers wages that equal only part of the value laborers create. Through their ownership of capital the employers posses that which is needed by workers to gain subsistence (jobs that pay wages). This puts capitalists in a position to set the length of the workday.

10. Note: the fact that Marxian exploitation is not indicated by capital making excessively large profits at the expense of excessively small wages, but by the mere fact that capitalists make a profit at all- however much or little. There may be variety in the degree of exploitation according to how large the profits of the capitalists are: they exploit much when their profits are large, and exploit little when their profits are little, so the mere making of profit is sufficient to prove the presence of exploitation in Marxian thinking.

11. The rate of surplus value(the rate of exploitation)

s S’= /v

It is the ratio of the surplus value to the variable capital or it can also be defined as the ratio between the time workers need to work back their wage and the remainder of the time left in the working day.

Note: when the working day is lengthened, the rate of surplus value increases; even if the working day were not lengthened surplus value could be increased by raising the efficiency of production and thus reducing the value of the worker’s labor power.

12. The determinants of the rate of profit

The rate of profit is (p’) is the ratio of surplus value to the total capital invested

s p’= ―

Where p’= the rate of profit

s = surplus value

c = depreciation on machinery and the cost of raw materials

v = labor

13. The organic composition of capital as a measurement of the degree of capital intensity of production

2 = ―

As capitalists invest relatively more in machinery and less in labor power the

organic composition of capital 2 increases and profit (p’) falls (i.e. an increase in the capital

intensity of production is indicative of a higher 2 14. The “transformation problem” or “the great contradiction” of Marx’s labor theory of value is that according to its assumptions: industries that employ a relatively large amount of machinery and raw materials and a relatively small amount of labor will have a lower surplus value and profit rate on invested capital, than industries that employ a small amount of constant capital and a large amount of labor. In reality this is not so, instead mechanized industries using much capital and little labor have at least as high a rate of profit as industries using little capital and much labor (because profit rates tend to equalize among industries).

15. Why according to Marx the profit rate falls when the degree of capital intensity rises

Increasing efficiency through mechanization raises the organic composition of capital, which is why the profit rate (p’) tends to fall over the long run.

16. Why according to Marx, capitalist may still have an incentive to mechanize even when the rate of profit falls

There are two reasons. First the enterprise that leads in promoting efficient production through the use of more and better constant capital will temporarily receive extra profits by lowering its costs of production. Eventually product prices will fall to reflect the lower costs, and the employer who lags behind the trend toward mechanization in a particular industry will not survive. Second, the greater the efficiency of production, the lower the value of labor power (that is the number of hours required to produce the subsistence) and the greater the total amount of profit produced per working day.

17. How a falling rate of profit due to mechanization can be temporarily offset by other forces, which are:

1The intensity of exploitation can be raised by forcing the workers to increase their pace of work or by lengthening their working day.

2Wages may temporarily be cut below their value.

3The constant capital may be cheapened

4Growing population in relation to jobs and increasing technological unemployment are conducive to setting up new industries that use much labor and little capital 5Foreign trade raises the rate of profit by cheapening the elements of both constant capital and the necessities of life.

6The rate of exploitation is increased by reducing the value of labor power through increased efficiency of production.

18. The merits and demerits of Marx’s arguments against Say’s Law

SKIPPED (pg 79 last paragraph to pg 80 first paragraph, pg 195 Textbook)???????????????

19. Marx’s view on centralization of capital: how large capital destroys small capital

Large capital destroys small capital through price wars (cheapening commodities; the cheapness depends on the productiveness of labor and the scale of production. Therefore the larger capitals push the smaller capitals out of the market

20. Note: Marx’s view on the intensification of class conflict and the inevitability of revolution:

Increasingly concentrated capital is confronted by increasingly concentrated and desperate labor. The concentration of wealth in the hands of fewer and fewer capitalists and the impoverishment of the workers together set the stage for class conflict. The growing “misery, degradation and exploitation” of the workers raise their sense of solidarity and will to revolt. The workers eventually overthrow the capitalists and establish a dictatorship of the proletariat.

1State ownership of the means of production replaces private ownership, 2the rate of capital expansion is stabilized, and 3the exploitation of workers is eliminated. The workers in a sense become “owners of the capital”.

21. Note: Marx’s accurate prediction of rising inequalities within countries as well as between countries

In our era economic power has become more concentrated and income distribution has become more unequal under capitalism. Despite the positive changes capitalism has brought we can’t ignore the fact that income inequalities still abound (some sections of society are extremely better off than others, this is seen by the skewed income inequalities that currently exist)

22. Note: Marx’ accurate highlighting of the possibility of Technological unemployment (machines replacing workers) He highlighted the substitution effect as it applies to labor-saving capital. Indeed in some circumstances new and more advanced machines can replace labor.

23. Marx’s accurate prediction of capitalism’s proneness to cyclical instability (even though the reasons which he gives for this instability are questionable)

Marx was one of the first economists to note that business cycles are a normal occurrence in capitalist economies; he addressed cyclical upswings and downswings in the market economy.

24. Marx’s inaccurate prediction of falling profits and wages

“Historically, the rate of return on capital and the rate of profit have oscillated (move back and forth in regular rhythm) over the business cycle but have not trended downward…real wages have risen quite dramatically over the decades since Marx wrote, and labor’s share of national income has either increased or been relatively constant in most industrial nations ”

25. The harmony as well as the conflict between labor and ownership

SKIPPED??????????????????????? (I’m not sure)

26. The dangers of collectivism inherent in Marx’s policy proposals

Marx believed that when the working class revolt against capitalism and establish their own dictatorship of the proletariat which will nationalize capital and land (so in a sense workers will become owners of capital. The reality is that state officials become the capitalist and workers remain workers, with as little power as before. Rather than a “dictatorship of the proletariat” Marxism establishes a “dictatorship of state officialdom” The Russian and Cuban Revolutions are good examples to mention (ref to page 69-70 in the study guide)

27. The naivety of Marx’s ultimate communist heaven which has no government and no private property

Marx postulated that the dialectical process would continue until finally the state “withers away” and pure communism prevails wherein there is no government and no private ownership of property. This was because he felt that the state acting as the executive of the bourgeoisie as a whole, would guarantee those conditions that would produce an oppressed proletariat. (Can you imagine for a moment what a country with absolutely no government? It’s quite had for me to conceive such. A condition of absolute anarchy comes to my mind. Could we have law and order without any? What about the provision of public goods? regulation? and many other functions aspects that are widely considered as functions of Government in our era.) . Marx did not foresee welfare statism, public utility regulation, laws that establish the right of unions to organize and strike, fiscal and monetary policy etc. Private business can indeed often be greedy but, with regard to a communal concern state of ownership (i.e. no private ownership) one must consider the profit motive because it plays an indispensable role as an incentive for productivity and efficiency. There is just less motivation for state officials (or anyone for that matter) to be productive because they do not stand to gain rewards for productive success nor do they stand to lose when production fails/drops. The other disadvantage is the state officials under the communal concern state are not immune to corruption either, they are also capable of oppressing the masses with their greed.

FUTHER EXAM QUESTIONS:

1. What constitutes wealth in the eyes of Marx and what should be regarded as productive and unproductive?

“Use values constitute the substance of all wealth. He would therefore have said that a large wheat crop represents greater utility and therefore greater wealth, than a small wheat crop. According to his Labor theory of value a commodity is something produced for profit and capable of satisfying human wants, this commodity may satisfy these wants directly (as means of subsistence) or indirectly (as means of production).

The textbook and study guide don’t state this but , I’m guessing that since he esteemed labor so much to him a wealthy nation was one with a huge labor force that is employed.

In Marx’s theory of exploitation capital, entrepreneurship and nature are implicitly assumed not to make any productive contribution at all because according to him only labor is productive (ref to No. 6 above)

2. Explain and critically discuss Marx’s Law of Motion of Capitalism, (according to which Capitalism inevitably destroys itself. Explain why capitalism has not yet destroyed itself and why this may still happen for reasons advanced by Marx

His Law of Motion is derived from his Theory of History which postulates that history is a process through which the static relations of production (the Thesis) come into eventual conflict with the dynamic forces of production (the Antithesis) which results in conflict (that conflict in turn) revolutionizes the system so that new relations of production (synthesis and new thesis) usher in the higher development of the forces of production. In essence his theory postulates that the mechanism for overthrowing old societies is class struggle

He used six important interrelated concepts to construct his theory of capitalism, which are:

1. The labor theory of value- a commodity is something produced for profit and capable of satisfying human wants, this commodity may satisfy these wants directly (as means of subsistence) or indirectly (as means of production). Use values constitute the substance of all wealth. He would therefore have said that a large wheat crop represents greater utility and therefore greater wealth, than a small wheat crop. In addition to use value, a commodity has exchange value, referred to as “value”. The “value” of a commodity is determined by the socially necessary labor time needed to produce it.

The socially necessary labor time includes 1 the direct labor in producing the commodity, 2 the labor embodied in the machinery and raw materials that are used up during the process of production, 3and the value transferred to the commodity during this process.

Suppose the average labor time contained in a pair of shoes is 10 hours. This average socially necessary labor determines the value of the shoes. If a worker is incompetent or lazy and takes 20 hours to produce a pair of shoes, its value is still only 10 hours. Suppose a worker or an employer leads the field in technology and efficiency and a pair of shoes is produced with 5 hours labor, its value is nevertheless 10 hours.

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2. The theory of exploitation-The foundational idea behind Marx’s theory of exploitation is that only labor is productive and only labor deserves a reward. Marx believed that the one commodity that can create a value greater than its own is labor power, so he reasoned that the capitalists receive a profit by purchasing this labor power. According to Marx all commodities sell at their value and thus to make a profit capitalists had to purchase a commodity that can create value greater than its own (labor) exploitation only arise when workers can produce more in a day than they must consume in order to maintain themselves and their families. Employers (capitalists) pay the worker the full market value of their labor power but the daily pay equals only part of the value the laborers create, thus there is a surplus this surplus is then the profit for the capitalist while the laborers are exploited. One must distinguish between labor power and labor time. Exam Question

Labor power: refers to a person’s ability to work and produce commodities, it is what the capitalist needs to make profits. The value of labor power is determined by the socially necessary labor time required to produce the cultural necessities of life consumed by the laborers and their families. If these necessities could be produced in 4 hours per day, the value of the commodity labor power would be 4 hours of labor time per day. If the productivity of labor doubled so that the necessities could be produced in 2 hours per day, that would mean that the value of labor power would fall by 50%

Labor time: refers to the actual process and duration of work. The exploitation of workers –the extraction of surplus value by capitalists. According to Marx, exploitation of labor arises only when workers can produce more in a day than they must consume in order to maintain themselves and their families. Then employers pay the workers wages that equal only part of the value laborers create. Through their ownership of capital the employers posses that which is needed by workers to gain subsistence (jobs that pay wages). This puts capitalists in a position to set the length of the workday.

The rate of surplus value(the rate of exploitation)

s S’= /v

It is the ratio of the surplus value to the variable capital or it can also be defined as the ratio between the time workers need to work back their wage and the remainder of the time left in the working day.

Note: when the working day is lengthened, the rate of surplus value increases; even if the working day were not lengthened surplus value could be increased by raising the efficiency of production and thus reducing the value of the worker’s labor power.

The rate of profit is (p’) is the ratio of surplus value to the total capital invested

p’= ―

Where p’= the rate of profit

s = surplus value

c = depreciation on machinery and the cost of raw materials

v = labor

The “transformation problem” or “the great contradiction” of Marx’s labor theory of value is that according to its assumptions: industries that employ a relatively large amount of machinery and raw materials and a relatively small amount of labor will have a lower surplus value and profit rate on invested capital, than industries that employ a small amount of constant capital and a large amount of labor. In reality this is not so, instead mechanized industries using much capital and little labor have at least as high a rate of profit as industries using little capital and much labor (because profit rates tend to equalize among industries.

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3. Capital accumulation and the falling rate of profit- According to Marx the rate of profit will tend to fall over the long run. The reason is the drive toward increasing efficiency through mechanization and labor saving inventions. This raises the organic composition of capital.

2 = ―

As a measurement of the degree of capital intensity of production it can be said that as capitalists invest relatively more in machinery and less in labor power, the

organic composition of capital 2 increases and profit (p’) falls (i.e. an increase in the

capital intensity of production is indicative of a higher 2

Why according to Marx, capitalist may still have an incentive to mechanize even when the rate of profit falls

There are two reasons. First the enterprise that leads in promoting efficient production through the use of more and better constant capital will temporarily receive extra profits by lowering its costs of production. Eventually product prices will fall to reflect the lower costs, and the employer who lags behind the trend toward mechanization in a particular industry will not survive. Second, the greater the efficiency of production, the lower the value of labor power (that is the number of hours required to produce the subsistence) and the greater the total amount of profit produced per working day. How a falling rate of profit due to mechanization can be temporarily offset by other forces, which are:

1The intensity of exploitation can be raised by forcing the workers to increase their pace of work or by lengthening their working day.

2Wages may temporarily be cut below their value.

3The constant capital may be cheapened

4Growing population in relation to jobs and increasing technological unemployment are conducive to setting up new industries that use much labor and little capital

5Foreign trade raises the rate of profit by cheapening the elements of both constant capital and the necessities of life.

6The rate of exploitation is increased by reducing the value of labor power through increased efficiency of production.

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4. Capital accumulation crises- Marx stated that another problem with capitalism is the tendency for increasingly severe business crises, he attacked Say’s Law (that aggregate supply creates its own aggregate demand) stating that at best it applied only to simple commodity production.

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5. Centralization of capital and concentration of Wealth- He says that the dynamics of capital accumulation and the tendency for recurring business crises centralize the ownership of capital and amasses wealth in fewer hands.

Marx’s view on centralization of capital: how large capital destroys small capital

Large capital destroys small capital through price wars (cheapening commodities; the cheapness depends on the productiveness of labor and the scale of production. Therefore the larger capitals push the smaller capitals out of the market

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6. Class struggle

Increasingly concentrated capital is confronted by increasingly concentrated and desperate labor. The concentration of wealth in the hands of fewer and fewer capitalists and the impoverishment of the workers together set the stage for class conflict. The growing “misery, degradation and exploitation” of the workers raise their sense of solidarity and will to revolt. The workers eventually overthrow the capitalists and establish a dictatorship of the proletariat.1State ownership of the means of production replaces private ownership, 2the rate of capital expansion is stabilized, and 3the exploitation of workers is eliminated. The workers in a sense become “owners of the capital”.

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Summary: the labor theory of value is the starting point for Marx’s Law of Motion because workers are the source of value, but they don’t get all value they are “exploited”. The difference between what they get and the full value is “surplus”, this surplus is the source of capital accumulation. Capital accumulation produces a falling rate of profit and business crises, which in turn cause centralization of capital and concentration of wealth in fewer hands. Concentrated capital and wealth causes the impoverishment of the workers. The terrible conditions of the working class lead to their revolt against capitalism (class conflict)