Marxist Economics: How Capitalism Works, and How It Doesn't

MARXIST ECONOMICS: HOW CAPITALISM WORKS, ANO HOW IT DOESN'T 49 Another reason, however, was that he wanted to show how the appear- ance of "equal exchange" of commodities in the market camouflaged ~ , inequality and exploitation. At its most superficial level, capitalism can ' V be described as a system in which production of commodities for the market becomes the dominant form. The problem for most economic analyses is that they don't get beyond th?s level. C~apter Four Commodities, Marx argued, have a dual character, having both "use value" and "exchange value." Like all products of human labor, they have Marxist Economics: use values, that is, they possess some useful quality for the individual or society in question. The commodity could be something that could be directly consumed, like food, or it could be a tool, like a spear or a ham How Capitalism Works, mer. A commodity must be useful to some potential buyer-it must have use value-or it cannot be sold. Yet it also has an exchange value, that is, and How It Doesn't it can exchange for other commodities in particular proportions. Com modities, however, are clearly not exchanged according to their degree of usefulness. On a scale of survival, food is more important than cars, but or most people, economics is a mystery better left unsolved. Econo that's not how their relative prices are set. Nor is weight a measure. I can't mists are viewed alternatively as geniuses or snake oil salesmen. exchange a pound of wheat for a pound of silver. Yet there must be some FEither way, economics is dismal, boring, hard to understand, and ul quantitative relation that all commodities have. "Despite their motley ap timately a waste of time-something for snobby professors or wealthy in pearance," Marx noted, commodities "have a common denominator."2 vestors, but not for us. Marx rescued economics from the economists and That common denominator is human labor. Almost all commodi turned it into a tool for explaining inequality, exploitation, and crisis-as ties are products of labor. Commodities exchange according to how well as a way to end all three. At the heart of Marx's understanding of the much labor-time they take to produce. In the real world they don't, but economics of capitalism is the "labor theory of value." This concept is the Marx begins by constructing a simplified model of the economy for the foundation for the whole edifice of his theory of capitalism. reason already noted. Marx argued that the action of buying and selli~g mass quantities of commodities in the market reduced them, behind of the producers, to quantities of abstract labor-time. The The labor theory of value the backs value of a commodity, that is, how much of it can be exchanged for an At the beginning of his most important work, Capital, Marx described other commodity, is determined by the amount oflabor-time necessary capitalist wealth as an "immense accumulation of commodities."' In to produce it. "Necessary labor-time" simply means the amount of order to get a handle on how capitalism worked, Marx began with this time something should take to make, more or less, using prevailing basic cell ~f the capitalist organism-the commodity-and worked techniques of production. If, for example, I build a kitchen cabinet from here, adding more features to present a systematic picture of the· with my hands in a day, when a cabinet of the same quality can be built whole. It is similar to the method used by scientists, who, if they want in a factory in an hour, I can't sell mine for twenty-four times the price to figure out a problem, devise an experiment that eliminates as many of the factory-made cabinet. A great portion of the time it took me to variable factors as possible to isolate the phenomenon they want to in build the cabinet is therefore not "socially necessary'' labor; it is, as far vestigate. They then work their way through a series of approximations, as the market is concerned, wasted labor. back to the real world. In one respect, Marx started this way because The value of one commodity becomes expressed in a certain he wanted to isolate key factors of the system and then put them back quantity of another commodity. This explains why, for example, a car together to show how they worked in their interaction and movement. is more valuable than a radio, or a computer is more expensive than a 50 THE MEANING OF MARXISM MARXIST ECONOMICS: HOW CAPITALISM WORKS, ANO HOW IT DOESN'T 51 pencil. One took more time to make than the other. bow down to. We are so accustomed to money's role in society that it Marx was influenced by the new economic analyses of the world pre appears to be the natural state of human society. But there's nothing sented by political economists like Adam Smith and David Ricardo. magical about money. Indeed, while the Spanish conquistadors killed Writing in a period before the political triumph of the bourgeoisie, these for gold because it was the quintessential form of money, in Inca soci economists wrote with a scientific rigor and honesty that later economists ety the metal was used for ornamentation. did not possess. "The value of a commodity," wtote Ricardo, "depends "All the illusions of the monetary system," wrote Marx, "arise on the relative quantity oflabor which is necessary for its production.''3 from the failure to perceive that money, though a physi~l object with This "labor theory of value" was dropped by later economists and re distinct properties, represents a social relation of production."8 What placed with the idea that value is equal to price, and price is determined does that mean? Money arises first as a means of exchanging com by a commodity's relative scarcity or abundance. The idea that labor is modities between independent producers. In a community where all ..,,,.,,..,,_,,_, the measure of value was too dangerous because it acknowledged that goods are produced and shared in common, everyone contributes their labor is the most important source of wealth under capitalism. But as work as they can, and everyone takes out what they need from the Marx pointed out, supply and demand "regulate nothing but the tempo common storehouses. Such a society does not need money, becaus~ rary fluctuations of market prices. They will explain to you why the mar there is no exchange of commodities taking place. ket price of a commodity rises above or sinks below its value, but they can The earliest exchange took the form of barter. Different communi never account for the value itself.'' 4 In other words, while the price of a ties exchanged surplus products they did not need for goods produced shoe and the price of a shoestring might fluctuate, shoes always cost more somewhere else that they needed but could not produce themselves. than shoestrings because shoes embody more labor than shoestrings. One community would take some surplus salt and trade it to a com Of course, you can't look at a commodity-a car or a book or a munity that needed it, in exchange for that other community's surplus shoe-and find any exchange value. All you'll see is that it is a useful obsidian or fur pelts, for example. The barter would be roughly based object fashioned by human hands. That's because value isn't really a on the amount of labor it took for each community to produce its par quality that any object has. Value is not really a thing, but a histori ticular product. This kind of barter existed probably even in the earliest cally evolved relation between human beings that takes "the fantastic hunter-gatherer societies. But it was incidental trade, not essential to a form of a relation between things." 5 Marx called the way in which cap group's survival. To put it another way, most of the use values a society italist society appears to imbue objects with characteristics they do not produced never became commodities, but were directly consumes 6 without being exchanged. Marx wrote in a "relationship of materially possess "the fetishism of commodities.'' Value is a meaning As Capital, less category outside of market relations, that is, outside a society in reciprocal isolation," that is, a society of independent producers, "does which independent, separate producers of commodities meet each not exist for the members of a primitive community of natural origin, whether it takes the form of a patriarchal family, an ancient Indian other in the marketplace. All human societies produce useful things, commune or an Inca State. The exchange of commodities begins where but not all societies produce them for exchange, that is, as items to be bought and sold. communities have their boundaries, at their points of contact with other communities.''9 At first trade is incidental and haph,azard, but then becomes regu There is nothing quite as wonderful as money lar and habitual, and on that basis communities can calculate roughly "Yellow, glittering, precious gold," says Timon in Shakespeare's Timon how much one sort of thing will exchange for another. Further eco ofAthens, has the power to "make black white" and "foul fair," "wrong nomic development that comes with the accumulation of an agricul right, base noble, old young," and even make the "coward valiant."7 tural surplus leads to a greater division of labor between agriculture Money seems to possess mystical powers-pieces of paper or of and the manufacture of weapons, tools, and luxuries, for example.

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