Groucho Marxism

Das Kapital was Marx’s major work on economic theory. However his work on economic theory began before he started writing Das Kapital, in an 1857 work known as the Grundrisse, German for ‘foundations’. Marx wrote other works on economic theory around this time too, such as A Critique of Political Economy written in 1859 and Theories of Surplus Value written in 1861-1863. His economic theories can be interpreted in different ways as his views altered slightly through time. Das Kapital itself consists of three volumes. In volume 1, Marx looks at the form the capitalist economy takes and explains his economic theories in great detail. Volume 2 deals mainly with the way money is transformed into capital, and volume 3 deals with capitalist production and the role of competition in the economy.

I myself have only read volume 1 of Das Kapital (so far). As I have said before on this blog, it is not an easy read. Part of the reason for this is that it is not solely a book on economics but is an amalgam of economics, politics, philosophy, and history. It employs a philosophical outlook that has come to be known as ‘dialectical materialism’, although Marx never used that phrase himself. In a previous blog post I explained that Marx was greatly influence by his fellow German philosopher Georg Hegel and his use of the dialectic: the belief that a thesis is always followed by an antithesis after which both combine into a synthesis. Marx himself used the phrase ‘materialist conception of history’ to describe his outlook and Engels later shortened this to ‘historical materialism’.

Historical materialism is an important part of Marxist economic theory, for it implies that a capitalist economy can only develop by swinging between boom and bust and will eventually collapse as a result of its internal contradictions. Marx came to this view by studying how the capitalist system developed historically. He observed that there had been four main stages in this development. The first stage he referred to as ‘primitive communism’ and refers to a classless society of hunter-gatherers. The second stage is a slave society in which some people gain power over others. The third stage is feudalism, where land is divided up between nobles and a strict class hierarchy is enforced. And the fourth stage is capitalism, where society is divided into two main classes: the bourgeoisie and the proletariat.

Marx dated the beginning of capitalism as the end of the 18th century, when the industrial revolution led to the factory system of production. Under feudalism, workers had been tied to plots of land without rights. Under capitalism, workers were allowed mobility so that they could move to cities to work in the factories. In feudal or slave societies, a person would usually exchange a commodity for another commodity in the market, and money, if it was used at all, was just an intermediary in the process. Marx characterized this as C-M-C, where C stands for commodity and M for money. In capitalist societies, money is invested by a capitalist to produce commodities which are then exchanged for more money. Marx characterized this as M-C-M’ and referred to the difference M’-M as ‘surplus value’.

The term surplus value had been used by classical economists like Adam Smith and David Ricardo but the concept had not been examined in detail by them. Marx, on the other hand, wanted to understand where surplus value came from. It was obvious to all that under the feudal system, surplus value was created by the labour of the serf and appropriated by the landlord. Marx realized that exactly the same thing happened under capitalism, with the worker taking the place of the serf and the capitalist taking the place of the landlord; the only difference is that under capitalism, this arrangement is hidden. The idea that surplus value is created by human labour is referred to as the ‘labour theory of value’. Marx developed his own derivation of the labour theory of value which I will now briefly summarize.

According to Marx, commodities have two different values: a ‘use value’, the value the commodity has by dint of meeting the needs of a consumer; and an ‘exchange value’, the value the commodity has relative to other commodities traded in the market. Use values are not dependent on markets, whereas exchange values are. Because exchange values of commodities can be compared, they must have some essence in common. The only thing all commodities have in common, Marx reasoned, is that they are products of human labour. Hence, human labour must be the source of exchange value. Under capitalism, surplus value is realized through exchange, so human labour must also be the source of surplus value. Marx considered this a proof that the labour theory of value must hold under capitalism.

Nonetheless, Marx puzzled over the way in which the capitalist was able to extract this surplus value. He eventually realized that the answer lay in the distinction between labour power (the capacity to do work) and labour (the actual work done). When a capitalist hires a worker, their labour power is turned into labour. There is a difference between the exchange value the worker receives for their labour power and the exchange value of what they produce. This is the surplus value which is appropriated by the capitalist. Marx saw that the working day is divided into necessary labour – the time a worker spends actually earning amount they are paid in wages – and surplus labour – the time spent producing surplus value for the capitalist. It is through surplus labour that workers are exploited under capitalism.