Exchange value is the phenomenal form of value. And the value of commodities is determined by the labour time socially necessary for their production. Why do we need a theory of value? How does it help us analyse the dynamics of capitalist society? Here's an example. The first ballpoint pen was produced by the Reynolds International Pen Company in As is usual in capitalist innovation, Reynolds did not invent the ballpoint. He just bought the patent off the shelf. The novelty value of the pens caught on and production, and profits, expanded sharply.
Karl Marx - 4. Marx’s Labour Theory of Value
By now Reynolds had pioneered mass production methods and unit costs had fallen to 60c. By February the cutting edge price was 98c and the following year saw the 39c ballpoint costing just 10c to mass-produce. In prices had fallen further to 25c as the ballpoint effectively replaced the fountain pen remember them? Why did ballpoints get cheaper? Because it took less labour time to produce each one. That's obvious.
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It's equally obvious that Reynolds and his fellow capitalists were not using labour time calculations. They were just chasing a fast buck. And they decided, in competing with one another, that the best way to sell things cheaper than the opposition is to make them cheaper - that is with a smaller expenditure of labour time. That is precisely how the law of value asserts itself behind the backs of the individual actors.
Every year the 'Financial Times' publishes its 'Global ', its list of the biggest companies in the world. Businesses are ranked by market capitalisation, which basically means total share price. General Electric is a conglomerate with a finger in all sorts of pies - though not, these days, electricity. In many ways General Electric is more typical of the biggest business. It employs , workers. In fact if you were to rank big business by the number of workers Wal-Mart would come top with 1,, on the payroll.
He must have worked very hard. Jack therefore got 1, times as much as the average blue-collar GE worker in the US. One reason the firm gave him so much is that he saved the owners the shareholders lots of money.
Marx's view of history
He saved money by sacking loyal American operatives and 'downsizing' work to Mexico. Jack earned 9, times as much as the average Mexican employee. But don't get the idea Jack is basically on a wage. Most of his wedge came from stock options - the right to buy the company's shares. In the roaring stock market of the s it was a one-way bet for the rich.
Chief Executive Officers got 85 times as much as the rest of the workforce in By it was times as much, and stock options were the crowbar opening up the gap between rich and poor. It should be explained that share capitalisation is an assessment of expected future profitability of the company, for that is what speculators are interested in when they buy the shares. It is not a stocktake of the assets. Most of the assets of Microsoft are in any case intangible. They are monopoly rights to intellectual property, like the Windows system itself, rights jealously guarded by high-paid lawyers.
Microsoft employs 'only' 31, workers - though readers who know how the firm operates realise that plenty more are subcontracted into the global 'team'. The great question of our age is how these gigantic corporations got rich and stay rich at the expense of the rest of us. That question is answered by Marxist economics. Let's first look at classes in capitalist society. We'll use the definitions in the 'Communist Manifesto'. Our enemy is the bourgeoisie "the class of modern capitalists, owners of the means of social production and employers of wage labour.
Even Bill Gates, the world's richest man, is not the sole owner of Microsoft, though he is reckoned to have a controlling interest in the company. But General Electric is more typical in this respect.
The Multiple Meanings of Marx’s Value Theory
What does this show? It shows how capital has accumulated. Big business has grown enormously since the time of Marx, when most firms were family-owned. Then there's us. In , at the dawn of the capitalist era, the Tory parson Townsend put it this way, "Legal constraint to labour is attended with too much trouble, violence and noise…whereas hunger is not only a peaceable, silent, unremitted pressure but, as the most natural motive to industry and labour, it calls forth the most powerful exertions.
OK, so owning the means of production means owning shares. It follows that owning no means of production means owning no shares. Is that right? Not quite. It's actually quite hard to be a worker in Britain these days without owning shares - directly or indirectly. The state pension has been and is being progressively run down by governments both Labour and Tory.
If you're not in a company scheme and you can afford it, you'll probably feel the need to sign up to a Personal Pension Plan.
In this mysterious financial institution the investment fund manager will muck around with ouija boards or throw darts at the shares pages of the 'Financial Times' - and buy shares for you. If you're part of a company scheme they'll also have an investment fund manager who'll do the same. If you need insurance, or feel you want to save up for any other reason, your money will probably end up being lobbed at the Stock Exchange in some form.
With all the privatisation share give-aways under the Tories there are millions of workers with a few BT shares tucked behind the clock on the mantelpiece. They're not capitalists. They're just the sort of people who pick up fivers [five pound notes] when they see them lying on the pavement, that's all. So you can't really get away from holding shares.
But you're only a capitalist if you make most of your money for owning a share in the means of production. And however you stretch the definition that's a tiny proportion of the population. The rest of us are all on the other side. It's time we all realised it! There are other classes whose interests are discussed in the Manifesto.
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But capitalist and worker are the polar classes slugging it out for control to decide what sort of economic system rules our globe for future generations. Marx and Engels mention the middle class, "The lower strata of the middle class - the small tradespeople generally, the handicraftsmen and peasants - all these sink gradually into the proletariat, partly because their diminutive capital does not suffice for the scale on which modern industry is carried on, and is swamped in competition with the large capitalists, partly because their specialised skill is rendered worthless by new methods of production.
This middle class heavily outnumbered the workers in all countries with the possible exception of Britain in , Since then they have been progressively destroyed by the advance of large-scale capitalist production first in manufacturing, then in their last hide-outs of peasant agriculture and retail shops. Worker and capitalist are the polar classes in modern society, because we work, because we have to make a living - we do not own the means of production.
Our oppressors do no work because they make a very good living at our expense. The middle class in Marx's sense own their own petty means of production and, like us, they have to work. They owned their own farms and worked the land themselves. Now this class has virtually disappeared all over the continent. The modern use of the phrase middle class really means middle layers. Marx was not talking about people who try to live colour-supplement life styles.
But, people like university lecturers who fifty years ago would definitely have described themselves as middle class make a living by working for a wage Since they are workers, their employers have been as concerned as their private sector equivalents to cut wage costs and, the formerly privileged position of professionals like them has been eroded as a result. The inevitable result of these attacks has been for such people increasingly to identify themselves as working class.
The great trend of the past years has been a proletarianisation of these intermediate layers. The capitalist class maintains their hold over us through their ownership of the means of production. The factories and offices where we have to earn our daily bread are in their hands. Previous ruling classes in history have also perpetuated their dominance through a collective monopoly of the means of production.
In the Middle Ages the feudal lords owned the land. Further back the slaveholders owned slaves, who did all the hard work.
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Capitalists start with money. But in a market economy money is wealth and allows its owner to buy arcane pieces of paper which represent titles of ownership to the means of production. We are different too. As workers for a wage we are free. We can collect our cards and quit working for one capitalist but we can't give up working for them as a class. Social security levels in all capitalist countries are carefully crafted so as not to provide us with a standard of living we regard as normal. In any case they won't let you just chuck your job in and go on the dole. Workers are exploited under capitalism.