Wednesday, November 10, 2010

Capital: A basic review

Leaving aside for now its financial corollary, capital is money that is circulated productively in order to create more money.

For Marx, the important part about this for humanity centered on the question of where this "surplus" money -- "surplus-value" -- comes from. Capitalist economists didn't care enough, or perhaps knew well enough, not to ask this question. A century and a half later, we may note, they still aren't interested in entertaining it.

Marx arrived at the conclusion that surplus-value is directly attributable to unequal social relations; namely, an inequality of power. This inequality is present in the production of social goods, with one class endowed with private ownership rights, and another class made dependent without them: the first, owners; the second, workers. Owners have the power to decide what will be produced, while workers have the power to decide which owner is best to depend on for survival.

Owners compensate workers at the rate (socially) necessary for them to live. The difference between this value and the value at which products are sold is the surplus-value, captured by the owner. For example, an employee may work 3 hours of an 8-hour shift to produce the value necessary for him to live, but another 5 hours of time that is uncompensated, for the enrichment of his boss.

As an economic phenomenon, capital implies this inequality of social power between the people who own and the people who work. (Between them we may add an intermediary strata of people who manage -- workers who enforce the discipline of owners.) Under capitalism, it is this fundamental inequality that forms the basis for all wealth-creation. Remember this when the politicians appeal to you on the grounds of economic growth!

When we talk about "capital," we must be sure to bear all of this in mind. It is not as much about money as it is about the inequality between two classes of people, an inequality that is perpetuated through the pursuit of surplus-value.

6 comments:

Charles F. Oxtrot said...

Remember this when the politicians appeal to you on the grounds of economic growth!

Indeed!

Anonymous said...

"Owners compensate workers at the rate (socially) necessary for them to live."

necessary for owners to live, or for workers to live? real question, i'm not sure which you mean

anticapped said...

@ anon - workers, not owners.

Anonymous said...

I've been reading this blog for a while, without commenting, but this post has drawn my interest. Mainly because I don't understand what you're saying. Where is the mystery in the origin of "surplus-value"? Why are unequal social relations necessary to explain it? And why conflate it with the share of production accruing to owners?

Puzzled,

Sam

JRB said...

Hi Sam!

The basic idea is, when you don't have any independent means for survival, you are forced to rely on the people who do. The subsequent relationship contains this disparity in power.

If you own your own farm, for example, you can produce food for yourself, trade with others, etc.

Under industrial capitalism, if you don't have a means of self-sufficiency, all you have is your ability to work for others. This is considered a commodity -- the ability to work -- to be bought by the employer and sold by the individual.

One of the effects of industrial capitalism is to eliminate the means of self-sufficiency for most of the population. Productive property becomes concentrated in the hands of fewer and fewer employers, as industrial techniques put smaller competitors out of business.

This means that most of the population has no choice but to work for somebody else in order to live. This bestows a power advantage to employers, who can get people to work for them for whatever workers are willing to accept under the circumstances. Depending on how desperate workers are, this varies, but it generally supports the ability of employers to pay people at a value less than the market value of what is produced. This difference in value is the surplus.

One of the things employers discovered very early on was that if people had independent means of surviving, they wouldn't work for others in sufficient quantities to sustain capital accumulation. So the early industrial scene was characterized by forcible dispossession of rural communities. This is happening right now in China and India, by the way, for the same reasons.

I hope this explains your first two questions. I'm not sure what you mean by "conflating it with the share of production accruing to owners" since the "share" of value accruing to owners is produced by their employees. It wouldn't exist without them, nor would it accrue to owners if worker's first preferences were observed: workers would either share in ownership, or they wouldn't work for the disproportional enrichment of others.

Let me know how you feel about all this propaganda!

Anonymous said...

Hi JDR!

I have suddenly been snowed under with schoolwork, and so do not have the time to give your reply the attention it deserves. But I found it interesting, and hope to be able to give a proper response in the next day or three.

Sam