Karl Marx – Theory of Capitalism
1. Owning the means of production
We all need material conditions to survive. We need food, clothes, and houses to remain alive. For these things to be produced, we need land, agricultural machines, tools, factories, transportation devices like trains for these goods to be produced to meet our needs.
The first set of things such as food, clothes and houses are called the ‘Means of subsistence’. The second set of things like land, mines, tools, machines, factories are called ‘Means of Production’.
A society must have access to the Means of Production to produce the Means of Sustenance.
Central characteristics of Capitalism …
Quite obviously, an individual or a group can’t own both the Means of Production and the Means of Sustenance. So, the average consumer or an ordinary individual will approach another person to make use of the land, factories etc. that he owns to produce the items like bread, butter, clothes, cement, steel etc. to sell these to those who consume it. This is the starting point of Capitalism. The small group of people who own the Means of Production are in a very advantageous position. They employ low-paid workers in their farms and factories to produce items like bread, medicine, clothes, cement steel etc. and sell them to ordinary consumers making huge profits.
2. Use-value and Exchange-value
We need hundreds of items for our daily use. We will be interested in persons or firms that offer these to us. If someone offers pork (pig meat) in a Muslim country, he will find no customers. Use of pork in a Muslim country is nil. Only those items that find use in our daily lives are traded. No one trades in items like air, because, it’s so freely available.
For an item to be tradable, and thus have ‘exchange value’, labor has to be an input.
For example – A dead cow has no value for us until its skin is taken out, processed, and further processed to make shoes. So, for an item to have exchange value, labor must be an input.
This item of labor complicates the story of Capitalism.
Labor does not always lead to creation of Exchange Value. For example, the amount of labor we put to rear our children creates no Exchange Value, because we do not trade in our children.
Only when labor enhances the ‘User Value’ do we say that it adds to Exchange Value. For example, when we put labor to raw hide (skin of animals), we produce shoes, bags etc. Quite obviously, these items have high Exchange Value’.
For items to be traded freely, we have to pay fr them. The payment is made by currencies. This is where ‘money’ comes in as a critical ingredient of Capitalism.
3. Appropriation of surplus value
The capitalist owning the different means of production like land farms and factories employs labor to produce items of food, clothing etc. The labor working in the farms and factories are paid some fixed wages, normally just enough to maintain his family. The capitalist, on the other hand, gets huge quantities of the tradable items, and sells them to make huge profits. His bank balance swells, but his labor struggles hard to maintain his family with the low wages he gets.
The capitalist can use his profits for two purposes.
1. To expand his factory
2. To led a luxurious life
A big moral and ethical question here
If the laborers do the hard manual work in the farms and factories, why they will not get a major chunk f the profit and why the capitalist will enjoy it either for his own luxury or for expanding his business?
Quite obviously, capitalism causes ‘exploitation’ of the labor class or the ‘working class’.
We can clearly see here that the capitalist could run a factory or a farm to make profits only because he owns the ‘private property’ in the form of lands and factories. Thus, we can say that ‘private property’ and ‘exploitation’ go hand in hand; they are inseparable.
We have two choices here. Either we accept ‘exploitation’ as inevitable, or abolish private ownership of property altogether, and vest it with the government, so that it belongs to everyone.
4. Crisis and revolution
Quite understandably, capitalists resist the idea of abolishing private ownership of properties. They would like the system to run as usual, so that they can reinvest their profits to build larger and more efficient factories from which they could get more profits.
The problem starts when another capitalist next door, puts up a very modern and efficient factory to produce the same product at a lesser cost. He will sell his product at lesser price and try to drive the first capitalist to lose his share of the market. When pressurized like this, the first capitalist will lower his sales price by installing the latest machines and asking the labors to accept lower wages. This cycle of competition continues leading to a continuous decrease in wages of labors. The exploitation becomes unbearable and inhuman. The ugly face of Capitalism unveils itself.
5. The day of gloom arrives
Low wages and highly efficient machineries lead to a manifold increase in the amount of goods produced. The markets are flooded with items. As the wages of laborers have been reduced, they can’t buy much. The stocks overflow the stores. After a few days, the factories do not get fresh orders. The factories shut down, and the labors lose their jobs. No capitalist comes forward to buy the closed factories. A catastrophe looms.
A way out of this crisis could be for the retrenched workers to unite, forcibly take control of the closed factories, and run the units themselves. This marks the onset of an era where all the means of production are owned by the labor force/communist government.
6. The start of the communist revolution
Under this system, the workers own the factories, and share the profit among themselves. This is the model that Karl Marx advocated. This is the reason why Marx thought Capitalism contains the seed of its own destruction.