Second post on Marx's Capital. Why the merchant can't sell for more than his purchase price.

Marxism. Capital Book 1 Part 2

This is the second part of my examination of Karl Marx's Capital Book 1, comprising the chapters 4 - 25. The chapter numbering can vary between different editions, one chapter being split in several or vice versa.

PART 2. CONVERSION OF MONEY TO CAPITAL

Chapter 4. Conversion of money to capital

The general formula for Capital

We have seen the direct form for the circulation of commodities:
Commodity - Money - Commodity, C-M-C or sell to buy anew.
We also have the other way around, M-C-M or buy to sell anew.
Maybe it looks meaningless, you just exchange money for money.

But if you buy something for £100 and sell it for £110, you get your money back plus an increase of £10. This increase of the original value I call surplus value. The original value is not only preserved but is has increased. This increase makes capital out of money.

The purpose of the first process, Commodity - Money - Commodity or C-M-C, sell to buy, is consumption. The purpose of the other process, M-C-M, buy to sell, is to get money so you can repeat the process.
A better description is M-C-M', buy to sell for more money, the value begets surplus value, it gives birth to live young or at least it lays golden eggs.

In the first chapter, Marx "proved" that only labor creates value. Now he claims that the value increases when you sell something for more than you paid for it, that value begets surplus value. He has "discovered" that value is created by buying and selling, by the work of the capitalist. Logically they are equivalent; morally they are different, at least if the worker lives in poverty while the capitalist lives in luxury. It is the same reality he describes, the worker getting some money, the capitalist getting some money. And there are other ways to "create" value, just as valid.

Contradictions in the general formula

Money - Commodity - more Money or M-C-M', the formula for the capital's circulation, is unlike all our laws so far. It is different because the order of selling and buying is different.

Every law is different from all other laws; if not it would be one of the other laws.
This is not one of the usual dialectical laws. Now a law is the same thing as an action. If I buy and sell, then there is a law that I buy and sell. If I play the banjo, then there is a law that I play the banjo.

To see what happens, let us reduce the process to an exchange of commodities, C-C. A is a wine producer while B produces wheat. When it comes to use value, it is advantageous to both parts. A can't produce the same amount of wheat as B with the same amount of labor and vice versa.
If you use money as an intermediary, C-M-C, it does not change anything, the value of the commodity is set in the price before the exchange. That the value changes form does not mean that it changes.

It is easy to prove that the exchange of commodities does not change the value:
Let us assume that the seller has some inexplicable privilege to sell the commodity 10% over its value, for £110 when it is worth £100. He collects a £10 surplus value.
To continue with business, the seller has to buy new commodities. Because the one he buys from is a seller and a seller is permitted to add 10%, the buyer loses those 10% he won as a seller. All that happens is that the money will be worth less, we get an inflation of 10%. Should the buyer get a privilege to buy the commodity under its value, it works the same way.
Thus you cannot explain the production of surplus value with the seller selling his commodity over its value or the buyer buying his commodity under its value.

Still that is how Marx just explained the surplus value, with the seller selling his commodity over its value. According to him, the seller has an inexplicable privilege to raise the value, Money - Commodity - more Money, to buy so he can sell for a higher price.
Marx assumes what he wants to prove, that the value is not changed when buying and selling. Then he assumes that it is not possible to change this.

Does not Marx read what he writes? It's such utter rubbish. He claims that if a retail dealer buys from a wholesale dealer, the retail dealer cannot raise the price above the purchase price because if he does, the wholesale dealer will raise his price with the same amount. It does not matter if he equates value and price or if he regards them as separate, the reasoning is the same.

The Buying and Selling of Labor Power

The increase in value cannot be attributed to the money, money only realizes the price. Neither can the change be attributed to the resale of the commodity; the resale is only a change from natural form to monetary form.
The change must be attributed to the commodity but not to the selling because the commodity is sold to its value. Thus the change can only come from the commodity's use value as such, that is by the consumption of the commodity. To get value from the consumption of a commodity, our money possessor has to find a commodity that can generate value, a commodity where the consumption embodies labor and thus generates value. There is one such commodity - labor. The money possessor has to find persons who have no other commodity to sell but their labor.

Let us analyze this special commodity, the labor. Like any commodity it has a value. How do you find this? Like any commodity you get the value from the amount of labor needed to produce it, in this case the amount of labor needed to generate the necessaries, food, clothing, housing, family and other things needed to produce and maintain the workers. On the other hand, you get the necessary amount of necessaries from the standard of living that the working class has achieved. Thus the value of labor also contains a moral and a historical element.

Marx returns to a value depending on labor. I suppose we can disregard what Marx says about surplus value coming from selling at a higher price than buying, this looks most like some temporary unexplainable lapse from his side.
If you want to, you can assign the price (Marx still equates price and value) to amount of labor, to weight, to selling and buying. Marx's "proofs" that his assignation is more right than some others is, as we have seen, nonsense.

PART 3. PRODUCTION OF THE ABSOLUTE SURPLUS VALUE.

Chapter 5. The labor process and the process of producing value

The working process

The working process is an activity that aims at the production of use values. Under capitalism, the capitalist that owns the workers labor is supervising this activity. The product is the property of the capitalist.

The process of producing value

To demonstrate the value producing, we take an example from thread manufacturing.
We need raw material, let us say five kilos of cotton. For this the Capitalist pays its value, 10 shillings. The machinery wear costs 2 shillings. We assume normal working conditions and that it takes two working days to manufacture the thread. To the value of cotton and machinery wear is added the value of the manufacturing labor.

We assume that the labor of one worker has the value 3 shillings for one day, corresponding to 6 hours labor. If the worker in 6 hours makes 5 kilo thread out of 5 kilo cotton, he has added the value 3 shillings to the cotton giving 5 kilo thread the value 15 shillings.
But the working day is not 6 hours, it is 12 hours. The value of the labor is not the same thing as the value created, the value of the labor is 3 shillings while the value created is 6 shillings.

You sell and buy labor; it is natural to see it as a commodity. You can ascribe it a value. Or you can do like Marx did for other things you buy and sell, you can make an exception for labor. It is up to you if you want to call labor a commodity, but calling it this or that does not tell you anything about capitalism or about anything else.

Chapter 6. Constant capital and variable capital

The value of a commodity has two parts. The first part is value transferred from different objects, from what I call means of production.
A factory building standing for fifty years does every year transfer one fiftieth of its value to the commodities produced. A machine used to manufacture 10000 units of a commodity transfers 1 / 10000-th of its value to each unit. If you need 100 kilo of cotton to produce 100 kilo of thread, then the value of 100 kilo cotton is transferred to 100 kilo thread. It's the same with fuel for the machinery, color, lubrication and other things needed for manufacture.

The means of production do not create new value, their value is transmitted unchanged. Therefore I call the capital used for means of production constant capital.

The second method to add value to a commodity is to add labor, the more labor, the more value.
If a new machine enables a worker to produce as much thread in 6 hours as he produced in 36 hours with the old machine, the value of the labor he submits to one kilo thread is reduced to one sixth.

The value of the capital turned into labor, that is the wages, is changed in the labor process. Its value is reproduced, in addition to this a surplus value for the capitalist is produced. Because that part of the value is variable, I call this part of the capital the variable capital.

Chapter 7. The rate of surplus value

The capital C invested in a commodity consists of constant capital c and variable capital v, C = c + v. The value V of the commodity consists of C and a surplus value s, V = C + s or V = c + v + s.
The relationship between s and v I call the rate of the surplus value s', the formula is s' = s / v. The rate of the surplus value is also the ratio between the amount of labor used to produce the surplus value and the amount of labor used to reproduce the variable capital, thus it is the exact expression for the capitals exploitation of the worker.
That part of the product that corresponds to the surplus value is called the surplus product.

One morning Pippi Longstocking was more than usual satisfied with herself. She had found a new word, the word Spunk. The only problem was that she did not know what a spunk was. After spending the day searching and asking people, when she came home again she found a green beetle of a kind she had never seen before and she knew it was a spunk.

There are different ways to express exploitation. If you want to, you can say that the worker exploits the capitalist. To Marx with his Platonist outlook, exploitation can only be one thing. And just as Pippi Longstocking knows what a spunk is, the same way Marx knows what exploitation is.

Chapter 8. The working day

Here Marx discusses the working day, mainly by describing the abominable working conditions that were common. Often the workers were women and children.
He also discusses how the law limits the working time and how this law is circumvented.

Chapter 9. Rate and amount of the surplus value

Here Marx "proves" that if m' = m / v, then m = m' * v, and similar "laws".

PART 4. PRODUCTION OF RELATIVE SURPLUS VALUE

Chapter 10. The concept of relative surplus value

The surplus value produced by making the working day longer I call absolute surplus value. The surplus value that originates in making the necessary working time shorter and the surplus working time correspondently longer I call relative surplus value.

Chapter 11. Co-operation

Through co-operation, the production can be made more efficient. The cost to build a workshop for 20 men is lower than the cost to build two workshops for 10 men. Often two men can produce more in one hour than what one man can produce in two hours.

Chapter 12. Division of labor and manufacture

Manufacture is changed by changing the division of labor. Where earlier one man accomplished the whole production, now there might be one man for every step.

Chapter 13. Machinery and modern industry

Marx gives a survey of the introduction of machinery in industry and the consequences for the workers, with child work, insufferable conditions at home and work, lower wages, more stress and lost jobs.
The economical discussion is repeated and developed in chapter 23.

PART 5. PRODUCTION OF ABSOLUTE OCH RELATIVE SURPLUS VALUE

Chapter 14. Absolute and relative surplus value

This is something we know since chapter 10.

Chapter 15. Changes in price of labor and surplus value

If we assume that the commodity is sold at its value and that the manpower is bought at its value, the rate of surplus value is given by:
1) The length of the working day.
2) The intensity of the labor.
3) The productive power of the labor (this changes with changes in technique).

Footnote

A footnote is interesting:

If you change the taxation of the capitalist, the amount of surplus value he extorts from the worker does not change. The only thing that changes is the portion of what he puts in his own pocket compared to what he has to leave to others.

I am sure everybody working for the state will be happy to know that they are extorting the workers, just like any decent capitalist.

Chapter 16. Different expressions for the rate of the surplus value

With the rate of the surplus value I mean Surplus Value / Variable Capital. Because this is what I mean, those are wrong who mean something else.

Was Marx ever more brilliant?

PART 6. WAGES

Chapter 17. The Transformation of the Value or Price of Labor into Wages

The capitalistic production is only possible if there is surplus value produced for the capitalist. By paying the worker part of the value produced, part of the value produced is transformed into wage.

Chapter 18. Time Wages

If the working day is getting longer without any increase in wages, the pay per hour will decrease.

Chapter 19. Piece Wages

Piece wages means that good workers will be better paid than those not so good, but the relationship to the capitalist will not change. In real life, piece wages are often lower than time wages.

Chapter 20. National Differences of Wages

There are differences between different nations when it comes to wages. As a rule, both pay and rate of surplus value is higher in countries with more developed capitalistic production.

Chapter 21. Simple Reproduction

Simple reproduction is when somebody does not reinvest but spends the return on private consumption. If he invests £10000 in such a way that the return is £2000, and then spends these £2000 on private consumption, then it is simple reproduction. After 5 years, he has consumed for 5 * £2000, the same as the original capital. This is now lost and what is left is surplus value. This fact does not change if the capitalist believes that he is spending the surplus value and that the original capital is still there.

What happens is that A) the investor's capital is still there, and B) the investor gets a dividend. It does not matter what you call the dividend, original capital or surplus value. You do not get the money in red bills if you choose one alternative, you do not get it in blue bills if you choose the other. No matter what you choose to call it, you choose a convention. To say that one alternative is right and the other wrong is as meaningless as saying that it is wrong to speak English because you speak Swedish.

Chapter 22. Conversion of surplus value to Capital

If you use the dividend for investment instead for consumption, the surplus value is converted to capital.

If you compare with last chapter, you can see that Marx has chosen another convention. There, the dividend was part of the original capital. Here, the dividend is surplus value.

Chapter 23. The General Law of Capitalist Accumulation

With the increase in total capital, there is an increase in the capital used for wages. If we assume that the ratio between variable capital and constant capital remains constant, in other words that the amount of labor needed to process a certain amount of working material remains constant, then the demand for manpower increases in proportion with capital. This leads to shortage of manpower and rising wages. But just as with the slaves, better treatment and better standard of living does not abrogate their dependence and their exploitation.

The enterprise will develop according to one of two alternatives: Either the profit is good enough to let the wages go on rising. Or the profit falls so much so the capitalist decreases the investments, this in turn results in lower wages. The new wage may both be over or under the wage before the increase in total capital.

So, Marx has discovered that wages can both rise and get lower.

With the development of machinery, the value of each produced item will fall. The total value will increase because the number of produced items will increase more than the value of each item falls. Due to the development of machinery, the constant capital will increase more than the variable capital.

Big capital can manufacture commodities cheaper than small capital. This will have the effect of putting small companies out of business and the remaining companies getting bigger.

The characteristic development of industry, business cycles with alternating high and low production is a result of the changing number of unemployed. On the other hand, the number of unemployed is greatly influenced by the changing cycles.

With bigger capital, the proletariat and its production capacity is getting bigger. The number of unemployed also increases, even relative to the number of employed. This is the absolute, general law of capitalist accumulation. Like all laws, it is not always valid; it is modified by a lot of circumstances which will not be elaborated here.

What is interesting here is that Marx explicitly declares what he often leaves implied: a law, even if it is absolute and general, is valid only as long as there is nothing that makes it invalid, as long as nothing else happens.

Chapter 24. The so called primitive accumulation

Capital begets capital. But capital has not always existed. To start this development, money must be converted to capital by investment in production. There must have been a primitive accumulation.
This could be achieved in several ways. For example by men with power appropriating land that was earlier common property, by dispossessing farmers and changing cultivated land to pasture. At the same time, this gave the manufacturers an abundance of unemployed to choose among when they needed workers. Other popular sources of fortune were usury and trading with slaves and opium.

The formation of companies starts with small business where the worker owns his tools. With dirty tricks, many small businesses are merged into few big companies where the workers do not own the tools, the capitalist has expropriated the worker. The mechanization will increase like extortion and the rage of the working class. Through laws immanent in the capitalistic mode of production, the development will reach a level where the monopoly capital becomes a restraint. A restraint that will be blasted by production, the capitalists will be expropriated and the time is out for private property.

Let us compare, on one hand Marx predicting the future, on the other hand a soothsayer predicting the future by looking in a crystal ball. One difference you can see at once: Marx has no crystal ball. The soothsayer has more to base his predictions on; Marx makes his predictions without any supporting arguments. He talks about laws controlling the capitalistic mode of production but he does not tell which. He cannot tell which. As we saw in last chapter, a law - even if it is absolute and general - is something that only applies on condition that nothing else happens.
To know what laws that control a course of events, you must wait and see what happens, than you know what laws are valid. That's the dialectical method.

The appropriation of property by capital is the first negation of individual private property, the property created by own labor. With the necessity of a natural law, the capitalistic production creates its own negation, this is the negation of the negation. It does not restore private property but individual property as far as it can be combined with the achievements of capitalism: common ownership of land and means of production.

This is an unusual case. As a rule, Marx waits to see what happens before attaching a law to the proceedings. Here he is hurling his prophecies like any full-fledged prophet.

Chapter 25. The Modern Theory of Colonization

Compared to Western Europe, it is easy for the American worker to get some land, land that he owns and cultivates. This makes it difficult and expensive for the capitalist to hire workers. To add insult to injury, the American people is said to be unusually prosperous.
How can you remedy this? England tried, without caring about the law of supply and demand, to put an artificially high price on the uncultivated ground in its colonies. This way, the worker would have to work longer before getting independent. To keep the capitalists with workers, the state would use the money they got from selling ground, this money they got by breaking the holy law of supply and demand, to import poor people from Europe. This plan failed as the emigrants instead chose America.
But the progress proceeds. The big number of immigrants combined with the bad finances after the civil war brought about a finance aristocracy, enormous areas of land have been given to railway and mining speculators and others. The great republic is no longer the worker's promised land, even if they still are better off than most of them in Europe.

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