Presentation3.pptx

Karl Marx
Capital

Introduction to Capital
In “Commodities,” Marx explores the sources of “value” by asking what determines the worth or price of goods bought and sold on the market.
We often ask the question- how much is it worth? And usually the answer is in terms of money. Marx makes a distinction between two types of values.

He calls these “use-value” and “exchange-value.”
This is different than how we normally think about the value of something. Marx is also getting at the heart of an economic concept here- that money is just a means of exchange. Without the value we give to money – it is not worth anything – we as humans make it worth something. Think about a dollar bill, it is just a piece of paper- but we can exchange it for something else. That is how it has value.
For Marx- value is not the same as price

Use-Value & Exchange Value
Use-Value: the utility of a commodity or its ability to satisfy wants.
Something only has value if it can satisfy someone’s needs. For example – shoes have a use-value but a shoe with no soles might have no value to anyone. Also we cannot quantify use-value (i.e put a dollar amount on it) because we cannot say what has more use over something else (why does a pair of shoes have more use-value than a pair of pants?)

Exchange Value: expresses equivalencies—how much of a given commodity (e.g., corn) it takes to equal the value of another commodity (e.g., iron). So to break it down further– one bushel of corn has a value of one ton of iron (in this made-up example).
One way to think about it is that use-value is the qualitative form of value (what you use it for) and exchange value is the quantitative form of value (how much of another thing you can get for it)

Commodities
Labor Theory of Value: the value of an object is determined ultimately by the amount of labor time (hours, weeks, months, etc.) that it took to produce it. This is how we give something it’s value that we can exchange. And it also means that commodities that were produced using the same amount of labor have the same value. So if it takes 20 hours to produce a pair of shoes and 20 hours to produce a chair– then they have the same value. What then does this mean for name brands? Should Nike shoes (according to Marxist theory) be valued more than generic shoes (if it takes 20 hours to produce each of the shoes)?

By equating the value of goods with labor time, Marx not only outlined the economic principles that purportedly guide exchange, he also unmasked the root source of exploitation inherent in capitalist production.

In a capitalist economy, those who do not own the means of production have no choice but to sell their labor power in to survive. So what is their labor worth?
Marx defines the worth of labor as how much the laborer needs to get paid to survive- i.e. to clothe, feed and house herself and her family. Is this different from how we get paid today? How is this different from supply and demand?

Commodities: Surplus Value
Surplus Value: is the difference between what workers earn for their labor and the price or value of the goods that they produce. So lets say a worker produces shoes and and he needs to be a paid 1$ per hour in to survive– and it takes 20 hours to produce these shoes. The worker will get paid 20$. Now the capitalist takes the shoes to the market and sells each pair for 25$. He makes a five dollar profit– that 5$ is what Marx calls surplus value.

The capitalist has two principal means at his disposal for increasing profit and market share: increasing “absolute” or “relative” surplus value.

Surplus Value
Absolute Surplus Value: extending the working day. So let’s take the guy working in a shoe factory again and say this time he needs 10$ to feed and clothe and house himself and his family. He can earn this in 10 hours, but the capitalist keeps him working another three and he produces more shoes– he is still paid 10$ but the extra three hours is surplus value that goes directly to the capitalist. (In our example in the previous slide – the surplus value came from increasing the price of what the shoes were sold for more than what the capitalist paid the worker)

Relative Surplus Value: increasing the productivity of labor by instituting timesaving procedures. This was something that was important back then as we begin to see things like the assembly line as well as new machines that produce things a whole lot faster. Even today we see this– both techniques to increase productivity (this is sometimes through coercion, people work harder and faster if they fear losing their jobs) and also to new technology (computers, new machines, etc). How about asking people to produce more while staying at the same pay rate? (journalists for example must now produce more than they ever did – yet they don’t get paid more). Or furloughs – where people are asked to work (in same cases it is unpaid leave) but not get paid for it. How is this similar to concept of relative surplus value?

The problem with surplus value
Marx outlines a number of problems that happen with the capitalist’s pursuit of profit and how these problems will lead to the demise of the capitalist system.

The first has to do with the relative surplus value (remember this has to do with timesaving procedures such as increased technology) – when a factory owner buys a new machines she is able to produce more goods in a shorter amount of time– but two things are going on – one is that these new machines cost money so the factory owner needs some way to pay for the new machines. Another thing that is happening is that this new technology is available to all other factory owners also. So ALL factories are now producing more goods in a shorter amount of time. As you can imagine, this leads to lower prices (think of supply and demand – if there is a lot of supply of a good then the price falls). SO what do you think happens? Factory owners need to produce more and more to make up for these lower prices – which sends the prices even lower (more supply). This is one way Marx predicts, that capitalism will fail.

Industrial Reserve Army
In the long-run, this profit seeking (through surplus value) also has costs. As workers become less skilled (since they only need to perform one repetitive task on a machine) they become more expendable. There is a growing “industrial reserve army” – this is a Marxist term for a large unemployed class always ready to take a job. So what happens if you know that there are 100s of people ready to take your job? You likely work in conditions that are not great, and for not great pay. You do not have any bargaining power. If you tell your boss you want more money or better working conditions – your boss will easily fire you because there is always some from the industrial reserve army to take your place. Workers become more and more exploited and over time are unable to afford ANY goods but bare necessities. What do you think this means for the factories? They are increasing production (remember they need to do this to sell more to stay competitive) but there are fewer people to buy their goods. This results in recessions which Marx argues are an intrinsic part of the capitalist system and will continue to get worse.

Commodities: Fetishism of Commodities
Fetishism of commodities is a reworked version of Marx’s concept of alienation

Fetishism refers to the distorted relationship existing between individuals and the production and consumption of goods.

This concept is particular relevant today– think about consumer culture and how much “value” we place on things we buy and name brands. Why do we pay more for name brands? Especially when we think about how many times we are just paying for the name itself. Many of the sneakers we buy are produced in the same factories – but we pay more for Nike sneakers than the ones without a name on it. We are giving the Nike sneakers a false value and paying for it with our labor (through the money we earned working).

We treat the goods we buy as if they have “magical” powers. We lose sight of the fact that we create commodities and, in doing so, grant them a power over us that in reality they do not hold.
Remember the majority of us are part of the working class- we are making these products (collectively) yet we assign them a magical power and a worth beyond their “Use-value”
Here is a great video which illustrates this concept

Commodities: Fetishism of Commodities

Commodities: The General Formula For Capital
Marx describes the cycle or circulation of commodities peculiar to capitalism. Unlike other economic arrangements, production under capitalism is driven by profit.

The owners of the means of production are concerned primarily with generating more wealth and capital, not with satisfying the standards of living established through tradition.
So w

Video –on commodity fetishism and theory of value

“Commodity fetishism is the process of ascribing magic “phantom-like” qualities to an object, whereby the human labour required to make that object is lost once the object is associated with a monetary value for exchange. Under capitalism, once the object emerges as a commodity that has been assigned a monetary value for equivalent universal exchange, it is fetishized, meaning that consumers come to believe that the object has intrinsic value in and of itself. The object’s value appears to come from the commodity, rather than the human labor that produced it. In “Wings,” Macklemore associates this process of commodity fetishism with Nike Air Max athletic shoes, explaining his belief as a child that the shoes would make him into a superstar athlete like Michael Jordan. The value of Nike shoes is displaced from the labour time that went into creating them, and instead is infused with an intrinsic value that comes into being through celebrity endorsement or symbols such as the iconic Nike “Swoosh.” “Wings” becomes a statement on how market capitalism seduces us into purchasing products that promise to make our lives better. Macklemore comes to this realization through the song’s narrative, exclaiming, “Nike tricked us all,” before finally realizing as the song comes to an end that “it’s just another pair of shoes.” Through tracks like “Wings,” Macklemore explores the darker side of consumption, urging listeners to critically rethink the messages imposed on us in capitalist societies that make us feel the need to constantly consume. This video can also be used to teach and distinguish among Marx’s notions of use-value and exchange-value, as well as his concept of surplus-value, which is the surplus or profit earned by the capitalist, above and beyond the use-value (labour power) required to produce the object. Viewers may be urged to identify the use-, exchange-, and surplus-values of the Nike shoe in the video. How is value made? Why do we pay $180 for a pair of Nike shoes, but only $20 for a pair of Sketcher shoes? In addition, this video bolsters discussion about the power of symbols and signification (and Baudrillard’s notion of sign-value) in creating cultural meaning embodied in a commodity sign (e.g., the Swoosh on the Nike shoe, or the Apple symbol on an iPhone).” (from http://www.thesociologicalcinema.com/videos/marxs-commodity-fetishism-and-theory-of-value),

Capital: (raw materials, machinery for production) or, more generally, money

Guiding the profit motive is a cycle of exchange Marx labeled as “M—C—M.”

(M): money; (C): commodity
So the capitalist enters with M (money – which can be used to buy raw material, machines etc) and then turns this M (with the labor she also purchases) into a commodity (usually called goods in modern economic speak) and the sells these for more M (more money which is then used to purchase more and more raw goods, machinery, etc to make more C (goods) and it becomes an ongoing cycle.

Commodities: The General Formula For Capital

For others, the cycle of exchange takes an inverse path.

The worker enters into exchange possessing only his labor power, which is sold as a commodity (C) on the market. The commodity, labor, is then exchanged for money (M) or a wage. The worker then takes the money and spends it on the commodities (C) necessary to his survival.

This cycle (C-M-C) must be repeated daily as the commodities bought by the worker, tied as they are to survival, are more or less immediately consumed.

Commodities: The General Formula For Capital

So what is the problem?
There is an inherent contradiction between workers and capitalists. And workers can never generate a profit. They will never “rise above” their station in life. Remember according to Marx, workers are only paid enough to live on – and we saw from this weeks reading and the slides that the capitalist system forces the capitalists to pay as little as possible and squeeze as much work out of the laborer as possible . This is done to ensure profit – because remember there is competition and the factory owners must be able to make a profit. So over time workers get paid less and less, yet they cannot demand more money because there is always someone there to take their place.

General Predictions
Marx predicted that over time, workers would understand that they are all in the same boat – they would gain “class consciousness” and this would allow them to work together to overthrow the capitalists and have a new system where each would work according to his ability and his needs.
In this new world, there would be no private property.

Coupled with this- Marx saw the capitalist system as doomed to fail. As I discuss in the earlier slides– this has to do with the pursuit of profit which ends in the demise of the capitalist. Capitalists can only cut costs so much – if they cut costs too much they flood the market and the price goes down so much that they need to cut costs even more to make a profit. Also as they cut costs they pay the workers less and less – so who is able to buy their goods anyway. One other factor is that as factories close (remember there is so much competition that they cannot all survive) these former factory owners are now workers (who now cannot afford these goods) so every bankrupt factory owner is one consumer less. This cycle leads to the fall of capitalism.

Key Quotations from Capital: Commodities
“A commodity is, in the first place, an object outside us, a thing that by its properties satisfies human wants of some sort or another.” (69)

“A commodity is therefore a mysterious thing, simply because in it the social character of men’s labour appears to them as an objective character stamped upon the product of that labour; because the relation of the producers to the sum total of their own labour is presented to them as a social relation, existing not between themselves, but between the products of their labour.” (72)

“…the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men’s hands. This I call the Fetishism…” (73)