This is a continuation of an article by Melanie MacDonald in which she explains the marxist analytic approach to the economic crisis. Using the global recession as a basis she makes an affirmative outline of the basics of the Marxist economic ideas.
See part one of this analysis >>>
Variable and constant capital
Like a machine, tool or raw material, capitalists see human labour to be just another commodity that must be purchased for use in the process of production. They don?t differentiate between the two in their accounting books. Both are just costs. But in reality, there is an important difference that lies in their quality as ?commodities?.
The robot falls into the category of constant capital because the capitalist payed a set price when he bought it and whether the money used to pay for it was borrowed or paid for up front, the robot entered into the sphere of the capitalist?s privately owned wealth once it was considered ?bought? and it was recorded as ?bought? in the accounting books of the capitalist who sold it. Over time, as the robot is applied to the production process it expends its value (the price paid for it) as it depreciates from wear and tear or from obsolescence. In the case of raw materials, also part of constant capital, they expend their value (price) quickly as they are completely consumed and incorporated into the new product being made. The value of the raw material or the robot as it depreciates is transferred into the product which is part of the costs that the capitalist uses to determine its price.
On the other hand, human labour or wages is a different kind of cost to the capitalist in that it is not bought outright in a final sale (that would be slavery!) but instead the worker?s ?time spent working? is bought for a wage. Workers wages fall into the category variable capital because the cost or price of wages changes over time. Wages can change depending on what a worker is willing to sell his labour time for (given the current climate of competition between workers) or depending on what sneaky methods the capitalist has come up with to reduce his wages bill (union busting and the casualization of labour spring to mind) or depending on what methods are used on a day to day basis to make the worker work harder and faster so that the value of his wages are covered in less time, thus leaving more time for the worker to produce values for the private appropriation of the capitalist. All of these things make the workers wage a variable part of the commodities that make up capital, different to the constant type.
Labour power and profits
Marxists, unlike the capitalists, recognize that the commodity workers sell is unique, unlike any other commodity. It is not labour per se they sell but labour power and only working class human beings sell it! This is the reason why Marxists focus on the working class! It isn?t just for fun. It is precicesly because only wage earning, living labour creates new values in the capitalist form of social production. Only workers produce the profits. At this point you might think workers wouldn?t be able to produce anything at all if it weren?t for the initial investment of the capitalists. But this would only be true if no one could imagine any other way of organizing society. And as you may or may not know, there is a long history of Marxists and socialists who paid with thier lives while attempting to change society for the better.
In the system as it is, only workers produce values over and above the ?cost?, ?value? or ?wage? of their labour power. It works like this: Let?s say that a worker freely enters into an agreement with a capitalist to work for a time period of 8 hours per day, 5 days a week for a set weekly wage of ?800. If at the end of 4 days the worker has helped produce enough toasters to cover the value of the ?800 wage his boss agreed to pay him then any values produced over and above that for the rest of the week is appropriated by the capitalist. Therefore, profits come from the unpaid labour of the working class. The capitalist appropriates all the values beyond the value of the workers wage without paying the worker who helped create those values. This is the very definition of exploitation and the foundation of how capitalists ?grow? their money.
The capitalists justify this ?arrangement? because they claim that they are the only group within society (as it is) who can make that initial investment that starts the whole process of production. They take all the ?risks? by putting their privately owned capital on the line. After all, if they do not sell all those new toasters they own, they will loose their investment! That seems fair enough doesn?t it? No! What they neglect to tell us is that the money these entrepreneurs invest is usually inherited or appropriated from a long historical legacy of variations of past exploitation, legal tricks and outright theft from earlier generations of exploited peoples. The enclosure act or the ?work-till-you-drop? forced labour practices in the Bolivian tin mines and Haitian coffee plantations at the height of colonialism comes to mind. Remember the child labour of the industrial revolution? Who was taking the risk in that situation? Never mind the huge tax breaks, massive state subsidizes, corporate welfare, guarantees and bail-outs from our tax dollars that back their increasingly meager and cowardly investments.
On top of the dubious ways they originally acquired their wealth, without giving us any credit for it, they then use every possible trick to avoid paying a single cent of that original privately owned wealth toward social production. The nature of their system of production is that they expect their entire initial investment to be paid back IN FULL. They expect profits ON TOP of their original investment and use a portion of that profit (that is appropriated from the unpaid labour of the working class let us remember!) for the exorbitant fees they pay themselves for services rendered. And only if there is enough profit left over do they use another portion of the profit to re-invest in more production.
Migration of Capital, competition and innovation
But alas, it is not all roses and Rolls Royces for the capitalists because as soon as an opportunity to make profit opens up, other capitalists of various sizes and strengths, pour in to vie for a share. This migration of capital, in part, produces a constant pressure on all the competing capitalists to innovate. They must develop new marketing strategies, techniques and technology in order to attract buyers and expand the market or to help them flood the market with cheaper goods to ensure their products are sold at the expense of other competing capitalists. To do this, they increase the productivity of their workforce. They speed up the production line, abolish breaks, reduce wages or extend the working day. Any ?innovation? they come up with may provide a finite period of super profits (values from prices well above the cost of production) but they are quickly copied and adopted by rival capitalists so that prices even out and generally fluctuate in and around the real value (the cost of production based on the socially necessary labour at that particular time, until the next innovation appears!) (See Marx?s socially necessary labour).
Part three analyzes the crucial concept of the rate of profit and its raise and fall which is the basis for the capitalist economic cycle.