by Gill Hands
c Thomas More
d John Locke
4 Who wrote Utopia?
a Thomas Hobbes
b Adam Smith
c John Locke
d Thomas More
5 Who built a model community for workers at New Lanark?
a Robert Owen
b Charles Fourier
c John Locke
d Adam Smith
6 Who invented the word feminist?
a Robert Owen
b Mary Shelley
c Germaine Greer
d Charles Fourier
7 Who thought society should be run by an elite of technocrats?
a Claude Henri de Saint Simon
b Charles Fourier
c Robert Owen
d Adam Smith
8 Which revolutionary said that ‘property is theft’?
a Pierre-Joseph Proudhon
b Louis Blanc
c Friedrich Engels
d Karl Marx
9 Who wrote The Wealth Of Nations?
a David Ricardo
b Adam Smith
c Thomas Hobbes
d Robert Owen
10 In which philosopher’s work did Marx believe the truth was stood on its head?
a Hegel’s
b Feuerbach’s
c Aristotle’s
d Fourier’s
Dig deeper
Terrell Carver (editor) The Cambridge Companion to Marx, Chapter 2, Cambridge University Press 1991
Ian Fraser, Hegel, Marx and the Concept of Need, Edinburgh University Press 1998
Robert L. Heilbroner, The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, Penguin Business Library 2000
Anthony Kenny, A New History of Western Philosophy, Oxford University Press 2007
Pierre-Joseph Proudhon, What is Property? An Inquiry into the Principle of Right and of Government, 1840 http://www.marxists.org/reference/subject/economics/proudhon/property/index.htm
Paul Thomas, The Cambridge Companion to Marx, Cambridge University Press, 1991
William E. Wilson, The Angel and the Serpent: The Story of New Harmony, Indiana University Press 1984
Allen W. Wood, Karl Marx (Revised) (Arguments of the Philosophers), Routledge 2004
4
Economic theory
In this chapter you will learn:
• about Marx’s economic analysis of capitalism
• how historical materialism relates to the economy
• key facts about labour, labour power and the division of labour
• about commodities, money and capital
• about profits and surplus value
• why Marx believed capitalism was in crisis.
Marx’s major work on the economy was Das Kapital, also known as Capital. The writing of these large volumes took many years and Marx often believed he was nearly finished only to find something more he needed to take into account, much to the dismay of his publisher. Marx began to be interested in the workings of the economy during his time as a journalist. When writing about the plight of the peasants and the political unrest in Europe, he began a serious study of the writings of political economists such as Adam Smith and David Ricardo. Until then his learning was based around the rarefied ideas of philosophers. Das Kapital was the end product of a long and systematic study of both political economy and the Blue Books in which the British Government recorded factory and census statistics. The Blue Books gave Marx first-hand evidence to illustrate some of his theories.
His work on Das Kapital really began in 1857 in a document that is now called the Grundrisse. This is German for ‘foundations’ or ‘elements’ and the original document was an investigation of the basic foundations of political economy. The original document comprised notes made in preparation for A Contribution to the Critique of Political Economy and Das Kapital, and was not intended for publication. Basically it was an early and rough draft of the finished work. Between these notes and the final publication of Das Kapital there were ten years of hard work. Marx wrote other works on the economy and economic theory around the same time, all of them stepping stones to the final work.
• 1845–46 The German Ideology. This was not published until after his death and it was a collaboration with Engels. It is important because it states the theory of the materialist view of history and further discusses alienation in a capitalist world.
• 1859 A Critique of Political Economy. A short piece on economics that is important mainly for the preface, which summarizes the theory of historical materialism.
• 1861–63 Theories of Surplus Value (sometimes known as Das Kapital: Volume 4). This work was contained in 23 huge notebooks and was not published until 1906–08. It is mainly notes for Das Kapital and deals with the historical perspective of economic theory.
Marx’s economic theories can be interpreted in different ways as his views altered slightly through time as he developed his theories, and foreign editions were slightly different from each other. Also, Engels translated much of his work into English and simplified it for the general reader: as we saw in the previous chapter there is some speculation about how much of Engels’ own philosophy was incorporated into the text.
Das Kapital consists of three volumes (or four if you count Theories of Surplus Value, extracted from Marx’s notes, as a part of the whole, which some people do). There are also numerous books of notes as yet unpublished.
In Volume 1, Marx looks at the form the capitalist economy takes and explains his economic theories in great detail. The first nine chapters deal with the explanation of his economic theory; the rest of the book explores the evidence that shows the ways in which capitalists exploit their workers. Volumes 2 and 3 of Das Kapital were published by Engels, written by him but based on notes that Marx left before he died. Volume 2 of Das Kapital deals mainly with the way money is transformed into capital and the way in which the circulation of capital and profit combine to form an economic system.
Volume 3 deals with capitalist production as a whole and the part that competition has to play in the economy. The first volume is the most interesting one for the non-academic reader. The second and third volumes are rather more dry and of interest mainly for those with a deep and theoretical thirst for knowledge of political economics and historical materialism.
Despite being the most interesting for the ordinary reader, the first volume is not an easy read, especially as many people today are not always aware of the literary references that Marx uses; he was rather fond of using puns, and allusions to books that he was reading at the time. Also, it is rather off-putting to open a book to find that it seems to consist of 50 per cent footnotes in tiny writing (for anyone really interested in what Marx had to say, the first volume is worth reading and the footnotes are some of the most interesting sections). Fortunately, for those without the time for a marathon reading session, there are two other works that explain Marx’s economic theory. As these works were based on lectures given to working men’s associations they are expressed in much simpler terms, but they still explain his economic theories in great detail. They are:
• Wage-Labour and Capital – based on lectures given in 1847 and finally published in 1849
• Value, Price and Profit – based on lectures given in 1865 and not discovered until after Marx’s death.
Das Kapital was not written solely as a book on economics, however. It was an amalgam of history, society and economics; Marx was not interested in economics purely as a way of predicting market prices in the way Adam Smith or David Ricardo had been in their explorations of political economy. Marx was interested more in the concept of the economy and its relation to the society around him at that time in history. He wished to describe the capitalist society, to understand what had formed that society, to see how it worked and to try to predict how it would develop or be destroyed by its internal contradictions or dialectics.
Spotlight
Don’t want to read th
e book? Then watch the film. Respected professor David Harvey has made a series of lectures on Marx’s Das Kapital available for everybody to watch online, completely free, at http://davidharvey.org/reading-capital/
Dialectical materialism, historical materialism and economy
Dialectical materialism is a term that is often used in relation to Marx and Marxist thought but it was not a phrase that Marx used himself. It probably entered Marxist theory through the writings of Georgi Plekhanov, a Russian socialist, and became popularized as a term under the rule of Lenin in the Soviet Union. Dialectical materialism is a synthesis of the philosophical terms of dialectics and materialism. Dialectics is often used in different ways by philosophers but most of them agree that conflict or contradiction are a part of the development of any dialectic process.
In the previous chapter we saw that Marx was greatly influenced by Hegel and by Hegel’s use of the dialectic: a philosophical belief that the thesis is always contradicted by the antithesis but eventually develops into the Aufhebung or sublation. Hegel’s dialectic view was an attempt to explain the growth and development of human history and thought; his philosophy was an idealist one, believing spirit to be at the centre of the development of history. Marx took a materialist view of the dialectic. He concentrated on the actual, material contradictions of life rather than on abstract philosophical theories and from this he developed the view that history was a product of class struggle.
‘My dialectic method is not only different from the Hegelian, but is its direct opposite. To Hegel, the life process of the human brain, i.e., the process of thinking, which, under the name of “the Idea,” he even transforms into an independent subject, is the demiurgos of the real world, and the real world is only the external, phenomenal form of “the Idea.” With me, on the contrary, the ideal is nothing else than the material world reflected by the human mind, and translated into forms of thought.’
Karl Marx, Das Kapital, 1873, afterword to the second German edition http://www.marxists.org/archive/marx/works/1867-c1/p3.htm
Marx himself used the phrase the ‘materialist conception of history’ to describe his theory and Engels shortened this to the phrase ‘historical materialism’. Marx saw capitalism not as the end of a process of the development of history as Hegel did, or as a natural result of the desire of people to ‘truck and barter’ in the way that Adam Smith did, but as a transitory phase in the progression of history. It would be a transitory state of society because of the internal contradictions or dialectics that would bring about its downfall.
This materialist view of history and its relation to economics is an important part of Marxist thought, for inherent in the dialectic viewpoint is the idea that the capitalist economy can only develop by swinging from one extreme to the other and that it will eventually collapse as a result of the contradictions present within it. In the dialectic view of the world everything is interconnected, constantly in motion and in a process of change, even society and the economy. This was what Marx was trying to understand and explain in his writing of Das Kapital.
The capitalist economy
In Das Kapital Marx first of all described the capitalist system that he saw had developed in Europe from feudalism. At the time Marx was writing, the Industrial Revolution in Europe was changing the way that people lived and worked into a capitalist one. It is important to remember that when Marx wrote Das Kapital, although capitalist industry and the factory system were very important in a few countries in Europe, mainly Britain and France, most of Europe and the rest of the world were still living in a semi-feudal way. Today capitalist technology, industry and economics are on a worldwide scale, something that Marx predicted in his writing.
Marx’s historical and materialist view of the world economy states that there had been four main stages in the development of the economy and society up to and including capitalism:
• Primitive communism This was the type of society of primitive hunter-gatherers where people had to work in a co-operative way to benefit from the food and raw materials provided by nature. Marx saw this form of society as a classless one.
• Slave society This developed where some people gained power over others, usually as a result of warfare, and so there was a lower class of those that worked and were not free and an upper class that exploited them.
• Feudalism In feudalism the land was divided up between nobles in return for support for the ruler of the country. There was a strict class hierarchy from royalty at the top, down through nobles, clergy, merchants, guild artisans and serfs. The serfs had some claim to their own land but most of their labour belonged to the lord and they had to pay taxes or tithes to the nobles and the Church.
• Capitalism This is a form of society that developed after the French Revolution, which comprised two main classes: the bourgeoisie and the proletariat. These classes are explained in more detail in Chapter 6, but basically the bourgeoisie were the rich and middle classes, and the proletariat were the workers. It is also an economic system where the means of production are mostly privately owned and capital is invested in goods and services in order to make a profit. It is the dominant economic system in the Western world today, but at the time that Marx was writing it was just beginning to spread as a result of the Industrial Revolution in Europe. The word capitalism began to be used by Marxists and was popularized by them. Like many terms attributed to Marx, it was one he did not use himself. He generally used the phrase ‘the capitalist mode of production’ when talking in economic terms, or ‘bourgeois society’ when describing more social aspects.
Marx’s date for the beginning of the capitalist mode of production was the last third of the eighteenth century, for this was when industrial developments led to the factory system of manufacture. Before this the economy had been a mercantile one, based on the trading of merchants and the accumulation of wealth in the form of gold or precious metals. The agricultural system was changing too. The ‘Enclosure Acts’ in Britain meant that commonly owned land came under private ownership. Instead of serfs living at subsistence level on the land of a feudal lord, with some rights on common land, they began to grow cash crops for sale on the open market.
Under the feudal system, workers were tied to plots of land without rights. Their surplus products then became the property of an aristocratic landlord class. The capitalist system had a different economic structure because it relied on costly machinery and factories before products could be made. Only those with money to invest could afford to own these.
Capitalism was unique because:
• Only under capitalism does human labour power become a commodity to be bought or sold.
• Under capitalism all production is the production of commodities.
Spotlight
Feudalism: You have two cows. Your lord takes some of the milk and all of the cream.
Communism: You have two cows. The State takes both and gives you some milk.
Traditional capitalism: You have two cows. You sell one and buy a bull.
Commodities
The classical economist Adam Smith defined commodities as products that are produced to be sold on the market. Commodities existed before capitalism, as did money. However, under capitalism the economy is dominated by commodity production in a way that didn’t exist in pre-capitalist society. In feudal or slave societies, a person would usually exchange a commodity to obtain something that they needed and money, if it was used, was just an intermediate stage of the process. Marx showed this financial circulation as C–M–C, where C stands for the commodity and M is money. The producer would sell his commodity for money and use the money to buy another commodity that he needed.
Under capitalism the circulation is slightly more complicated and can be shown as M–C–M1. In this case the money is invested by the capitalist to produce commodities which are then exchanged for more money. In capitalism the final amount of money is greater than the initial amount that was invested and this is the profit or, as Mar
x called it, the ‘surplus value’.
Theory of surplus value
Profit and surplus value were terms used in the works of classical economists like Smith and Ricardo but they were terms that were taken for granted and not examined in detail by them. At face value you make a profit if you sell something for more than you paid for it, but what makes one thing worth more than another, who decides it and how? Marx wanted to explore the question that puzzled the economists of the time: where does surplus value come from? To understand this he compared the way he believed the feudal economy worked with the workings of the economy under the capitalist mode of production.
Under the feudal system the landlord allowed his workers to cultivate the land in return for unpaid work, or rent, or both. It was obvious to all concerned that the landlord acquired the surplus product. Under capitalism this fact is hidden. Workers appear to be free to sell their labour power to the person who will give them the highest wages. It appears that they are given a fair day’s wage for a day’s work but, according to Marx, workers are being exploited. This exploitation is hidden by wages which allow the capitalist to cash in on the surplus produced by the workers. It took Marx many years to work out this theory of surplus value. It is a difficult concept, based on what a person’s labour, or work, is actually worth and how it is exchanged for goods. To explain this it is necessary to go into detail about the way the capitalist economy works and it is more easily understood by going back to the basics of the economy as Marx did, starting with the labour theory of value.
THE LABOUR THEORY OF VALUE
All products in capitalism are commodities. According to Marx, commodities are valued in two different ways:
• Use-value This means a commodity has a value of ‘usefulness’ that meets the needs of the consumer. For example, shoes protect your feet, sugar will sweeten food, etc.