an introduction to marxist economics

INTRODUCINGMr Karl Marx's

La b o r Th e o r y o f Va lu e

& an exploration of “Surplus Value”

wit h a s pe c ia l gue s t a ppe a r a nc e b y

Finance Capital

Social Surplus Product

Necessary labor > used for the subsistence of the producers themselves

Surplus labor > used to maintain the ruling class

Social surplus product is that part of social production which is produced by the laboring class but appropriated by the ruling class.

Examples

Slave working for masterWork six days for master > Work 1 day for self

Examples

Slave working for masterWork six days for master > Work 1 day for self

Serf working for LordWork 3 days for Lord > Work 3 days for self

Examples

Slave working for masterWork six days for master >Work 1 day for self

Serf working for LordWork 3 days for Lord > Work 3 days for self

Social Surplus Product

Surplus Value

Surplus value: the monetary form of the social surplus product.

- uncompensated labor, gratuitous labor, which the proletarian, the wage worker, gives the capitalist without receiving any value in exchange.

Commodity

A commodity is a product created to be exchanged on the market.

(as opposed to one which has been made for direct consumption.)

Commodity

Commodity = use value + exchange value.

Example

At home I make myself a cup of tea or I grow my own potatoes for my dinner....

Example

At home I make myself a cup of tea or I grow my own potatoes for my dinner....

> use value but not exchange value

Example

At home I make myself a cup of tea or I grow my own potatoes for my dinner....

> use value but not exchange value...

: NOT a Commodity

Example

BUT IF I make some one else a cup of tea or I grow potatoes for their dinner....and I do that in exchange for something else (eg: money)

> use value AND exchange value...

: IT IS A COMMODITY

Commodity

A commodity is a product created to be exchanged on the market.

Those concepts again... Necessary labor Surplus labor

Social surplus product

Surplus Value Commodity Use value Exchange value

The Law of Value

X Commodities exchanged

on the market for

Y Commodities

Exchanged on what basis?

Commodity

A commodity is a product created to be exchanged on the market.

Commodity

A commodity is a product created to be exchanged on the market.

The exchange value of a commodity is determined by the quantity of labor necessary to produce it.

Example

Tayloring < > Weaving : human laborCoat < > x quantity of linen : congealed labor time

What is Surplus Value?

Surplus value: the monetary form of the social surplus product.

[not the same as profits]

What is Surplus Value?

Capitalist buys the labor-power of the worker, and in exchange for this wage, he appropriates the entire production of that worker...

What is Surplus Value?

Capitalist buys the labor-power of the worker, and in exchange for this wage, he appropriates the entire production of that worker...

Surplus value is the difference between the value produced by the worker and the value of his own labor-power

COMMODITY

Labor-power is a commodity, and like the value of any other commodity, its value is the quantity of labor socially necessary to produce and reproduce it

( the living costs of the worker)

COMMODITY

labor-power = commodity

Labor Theory of Value:

> market prices are attracted by prices proportional to the labor time embodied in commodities.

Commodity > Congealed Labor

This is the kernel of the Marxist theory of value and the basis for all Marxist economic theory in general.

So we can now go off and read the 3 volumes ofCapital ...

To discover what is Capitalism?

Capitalism is....

a relationship

Meanwhile back at the ranch -- the productive economy...

Over accumulation of capital + productive overcapacity...

BECAUSE Investment outlets for the surplus

lacking > stagnation

Why is profitable investment lacking?

(1) the maturation of economies, in which the basic industrial structure no longer needs to be built up from scratch but simply reproduced (and thus can be normally funded out of depreciation allowances);

(2) the absence of any new technology that generates epoch-making stimulation and transformation of the economy such as with the introduction of the automobile (even the widespread use of computers and the Internet has not had the stimulating effect on the economy of earlier transformative technologies);

(3) growing inequality of income and wealth,which limits consumption demand at the bottom of the economy, and tends to reduce investment as unused productive capacity builds up and as the wealthy speculate more with their funds instead of investing in the

“real” economy—the goods and services producing sectors; and

(4) a process of monopolization , leading to an attenuation of price competition—usually considered to be the main force accounting for the flexibility and dynamism of the system.

-- [John Bellamy Foster]

The Financialization of the Economy

New outlets for surplus in the finance, insurances,

and real estate > S p e c u la t io n >

> Financial superstructure that increasingly took on a life of its own

> Bigger and bigger injections of debt > Main force lifting economic growth since the 1970s

Relation: Debt & Growth

Magdoff:”Although there is no exact relationship between debt creation and economic growth, in the 1970s the increase in the GDP was about sixty cents for every dollar of increased debt. By the early 2000s this had decreased to close to twenty cents of GDP growth for every dollar of new debt.”

A Crisis of Financialization

Coexistence of stagnation in the productive sector and inflation in the financial sector

“In the old days finance was treated as a modest helper of production. It tended to take on a life of its own and generate speculative excesses in the late stages of business cycle expansions. As a rule these episodes were of brief duration and had no lasting effects on the structure and functioning of the economy. In contrast, what has happened in recent years is the growth of a relatively independent financial sector, not in a period of overheating but on the contrary in a period of high-level stagnation (high-level because of the support provided to the economy by the militarily oriented public sector) in which private industry is profitable but lacks incentives to expand, hence stagnation of private real investment. But since corporations and their shareholders are doing well and, as always, are eager to expand their capital, they pour money into the financial markets, which respond by expanding their capacity to handle these growing sums and offering attractive new kinds of financial instruments. Such a process began in the 1970s and really took off in the 1980s. By the end of the decade, the old structure of the economy, consisting of a production system served by a modest financial adjunct, had given way to a new structure in which a greatly expanded financial sector had achieved a high degree of independence and sat on top of the underlying production system. That, in essence, is what we have now” -- Sweazy