Commodifying labour

Reading Marx’s Capital – Vol 1, Class 4

Commodifying Labour

In its earliest form, exchange of goods does not produce an increase in value.

Both of the people in the exchange can come away with a benefit, because they have achieved an increase in use values, by exchanging, they have ended up with qualitatively different things.

But under capitalism, transactions start and end in money, and money is qualitatively the same, so needs to be differentiated by quantity.

But if standard exchange does not produce an increase in quantity, something must be added to a commodity in between purchase and sale, something that can create surplus value, something called labour.

A quick summary of the last few lectures, we have moved from

  • Commodity – Commodity; to
  • Commodity – Money – Commodity; to
  • Money – Commodity- Money

But the last of these is different in that it begins and ends in money. Unlike commodities, money can differ not in quantity but only in quantity, and the only reason someone would go through the effort of exchanging money for a commodity and back to money is if there was something in it for them.

That “something” Marx terms “surplus value”.

That surplus value comes from a commodity which has the capacity to produce more value than it itself has – labour power.

The Transformation of Money into Capital

The General Formula for Capital

Capital is not just money, it is money used in a particular way. Capital is created as a social decision to use money in a particular way. – intent matters: CMC v MCM “the process is mediated in the first form by money, and in the second, conversely, by a commodity” (page 249).

In the exchange of commodity, there is a difference in the quality of a commodity at the end (start with linen, exchange it for corn), but money is different, instead of exchanging quality, you are exchanging amount.

One sum of money is distinguishable from another only by its amount. The process M-C-M does not therefore owe its content to any qualitative difference, between its extremes, because they are both money, but solely to quantative changes…this increment or excess over the original value I call “surplus value”.
Capital: Critique of Political Economy v. 1 (Classics S.), page 251

Capital is a process, movement, something is only capital when in motion, the moment it stops moving, it ceases being capital.

The simple circulation of commodities – selling in order to buy – is a means to a final goal which lies outside circulation, namely the appropriation of use values, the satisfaction of neeeds. As against this, the circulation of money as capital is an end in itself, for the valorization of value takes place only within this constantly renewed moment. The movement of capital is therefore limitless.
Capital: Critique of Political Economy v. 1 (Classics S.), page 253.

The important idea here is capital must keep moving. In the simple commodity exchange, there is an exit point, an end (it is linear) when the exchange has been made. But capital needs movement to survive, and it is limitless (circular). The capitalist is a capitalist because he is “throwing his money again and again into circulation” (page 255).

This all seems common sense, natural; when you put your money in a bank, it will grow, when you invest it, it will grow. At the moment we are suffering from low (in some cases negative) interest rates, which seem very unfair to investors. Rates are low in an attempt to stimulate economic activity, to get money off the sidelines and into the process of generating value, to kickstart the capitalist engine.

Contradictions in the General Formula

But how is value generated by capitalism?

In an exchange of commodity for commodity, there can be no gain. Someone is exchanging something for which they have no use for something that they want and has a use value for them. Additionally, people are better at (i.e. faster than usual at) creating some things than others, so they would get more by exchange than if they produced everything themselves.

But tin each case, they are exchanging something for something else of equal value; there seems to be no value added.

Marx runs through several historical arguments that have been used to identify the surplus value, including people paying more than their value, special classes of consumers, inflation, taxes, international trade. But if we make a straight exchange, equal value has changed hands. There might be an increased in fulfilled needs, but there is no increase or surplus.

However much we twist and turn, the final conclusion remains the same. If equivalents are exchanged, no surplus value results, and if non-equivalents are exchanged, we still have no surplus value. Circulation, or the exchange of commodities, creates no value.
Capital: Critique of Political Economy v. 1 (Classics S.), page 266

So where does this surplus come from?

Marx introduces merchant’s capital and user’s capital as the kick starters for capitalism. Merchants, who insert themselves “parasitically” in between buyers and sellers, and usurers, who destroyed feudalism by lending to landowners and ruining them when they couldn’t pay back debt.

These are corraled and disciplined back into the needs of capitalism. The distinction between usury (demanding unfair levels of payment) and interest (reasonable rates of return). There is a contest between industrial capital and financial capital.

The next step is the resolution of the zero sum conundrum

The money owner, who is as yet only a capitalist in larval form, must buy his commodities at their value, sell them at their value, and yet at the end of the process withdraw more value from circulation than he threw into it at the beginning.
Capital, page 269.

How?

The Sale and Purchase of Labour Power

Key to this is that Marx is making an analysis of capitalism that does not involve “cheating” in the world of exchange, everything will exchange at its value.

This is an attempt to undermine classical political economy, which says in perfectly functioning markets, everyone would be better off. In perfectly functioning markets, everything would exchange at use values, so if Marx can show that everyone is not necessarily better off in this situation, he has struck a solid blow.

The capitalist must find a commodity, labour power, and hire it at a rate that is less than the amount of value it can produce.

Marx’s first move is to define the requirements of labour: the labourer (seller of the labour commodity) must sell it freely, for a limited time only (not slavery) and freedom from the means of production (the labourer has no other commodity for sale other than his own labour).

Marx then makes the point that this is historical rather than natural (“this relation has no basis in natural history” page 273); it is a construct. It needs exchange, it needs money, but for capitalism to arise, it also needs people who are free to sell their labour as a commodity.

The Value of Labour

There is a good question of how much labour is worth? There are two parts to this

  • What is the labour-time necessary for the production of an article? The value will be a part of this.
  • On the other hand, this must be at least as much as the labourer (and their family, because you need the next generation of labourers) needs to exist. This will vary in place, time, etc. The poverty level/living wage is the value of a basket of commodities.

Freedom In (and From) the Market

So far everything is out in the open (“on the surface and in full view of everyone”). The process of exchange is transparent, people enter into it of their own free will and pricing and exchange is transparent.

So the capitalist owns the means of production, a labourer offers his labour, the tools and materials are provided by the capitalist. But then comes the interesting bit.

The process of the consumption of labour-power is at the same time the production process of commodities and surplus-value. the consumption of labour power is completed, as in the case of every other commodity, outside the market.
Capitalism, page 279

This happens outside the market.

The market, says Marx, “is a very Eden of the innate rights of man” (page 280). But when you leave the light of the market things are different, the capitalist

smirks self-importantly and is intent on business; the other is timid, holds back, like someone who has brought his own hide to market and now has nothing to expect but – a tanning.
Capitalism, page 280.

Summing Up

Exchange of commodities is possible without profit, without creating “surplus value”. In this situation, the exchange can be linear, with a beginning and an end. Commodities have natural limits, there are only so many “use values” one person can have.

But the capitalist society uses money, and money is limitless in the amount that can be amassed. The capitalist process is a means of amplifying money, but to so this, it needs motion and initiates and endless cycle.

This process breaks down into three parts:

  • The capitalist, the person who owns the means of production, throws money into the system and sees value fly back out of it.
  • The worker has only one commodity to sell (their labour) and a finite amount of it.
  • As the surplus value of the worker “flies off” the capitalist increases their wealth, the worker’s wealth stays the same.
  • The capitalist then throws the money back into the system. Rinse, repeat.

Events that happen in the market are clear and in the open. But value is increased away from the market, and what happens when labour and capital go away together to create value is something very different from the equal exchange we began with in C-M-C.

Further Thoughts

As always, once you start thinking about these issues, comment around it seems to crop up everywhere. For example, this quote around constraints on the power of capitalism – the worker needs to exist and have at least the satisfaction of some needs.

Take labour for example. It must meet at least two conditions in order to play its role in the capitalist economy. First, workers must maintain relations of solidarity within families and communities, otherwise they are not productive enough. Second, they must have enough to consume, otherwise aggregate demand is too low. For the first condition to be met, workers need a decent amount of time off work, and for the second condition to be met, they need relatively high shares of produced wealth. If they don’t, capitalism begins to self-destroy.
LSE Review of How Will capitalism End?

But no matter how it is phrased, it sounds incredibly calculating.

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