Modern Capitalism – The Marxist View: Part 1
Among Karl Marx's and Friedrich Engels' monumental theoretical works was Marx's analysis of the underpinnings of the capitalist mode of production. The epic work was their – mainly Marx's - 3-volume analysis of capitalism “Capital.”
We will begin by outlining the main points made in this work.
Commodities. Marx begins his analysis of capitalism by studying commodities, goods which are produced for exchange with other goods (or are eventually consumed). All commodities have a dual character. First, they have a “use-value,” indicating that a significant number of people desire or need this product. Secondly, they have an “exchange-value;” given commodities may be exchanged for other commodities (one or more or partially). A correlation between “use-value” and “exchange value” is not essential. Oxygen (air) is free, although its “use-value” is obvious; humans cannot live for more than a couple of minutes without it. Intricate jewelry made of precious stones may be extremely expensive, but jewelry is hardly essential for life.
Labor theory of value. Commodities have one thing in common: they are the product of human labor. The “exchange-value” or simply “value” of a commodity – on the average, not necessarily in every concrete situation – is determined by the average amount of labor expended by society in its production. “The labor-time socially necessary is that required to produce an article under the normal conditions of production and with the average degree of skill and intensity prevalent at the time” (Karl Marx, Capital, Vol. I, Progress Publishers 1986, p. 39). As technology advances and production becomes increasingly efficient, the socially necessary labor-time decreases. If the amount of labor expended on producing a given product exceeds the socially necessary labor-time, in general this does not increase the product's (the commodity's) value.
The labor theory of value did not originate with Marx, but he was the first to elaborate this theory to its ultimate conclusion. Labor “in a special form and with a definite aim” produces use-value, whereas the general expenditure of human labor power, or “abstract labor” - common to all commodities – imparts “value” to a commodity.
Money. Historically, the earliest exchange of commodities was through barter; one good was imply exchanged for another. Commodity exchange was greatly facilitated by the development of a “universal equivalent,” which was exchangeable for all other commodities. Precious metals, silver and gold primarily, emerged as the main universal equivalent because of their special properties. They are relatively inert chemically, are readily divisible into portions of various weights and are rare. What makes the precious metals valuable is the considerable human labor required to obtain them (prospecting, mining and purifying).
To further simplify exchange, banks and then governments issued paper certificates or paper “money” which represented a given amount of gold or silver. Instead of exchanging the actual precious metals, a cumbersome process, buyers and sellers would exchange paper notes which could be exchanged, presumably at any time, for the amounts of gold or silver each bill signified.
Violation of this principle has become one of the cardinal pillars of modern-day capitalism.
The reader notes that the substitute of paper money for the real thing opens up the way for serious abuse. What if the government prints far more fiat money than the amount of gold or silver it holds in reserve? Currency, no matter how fancy it looks, is simply printed. Actually, in modern day capitalism, most of the process of money-”printing” is done electronically – which is even simpler. Precious metals, on the other hand, obviously cannot be invented, but can be obtained only by the expenditure of actual human labor power.
Historically, the process of unbacked money printing was stimulated by economic crises and wars. But it now has become a general phenomenon.
Modern-day money everywhere has little correlation with the amount of precious metals held in reserve to “back up” the currency. This trick has become a major basis for delaying – since the 1930;s - major economic crises of the capitalist system. But this trick cannot hold back the floodgates indefinitely.
To be continued.