Lesson 26: Communist Economics 6: Relation of Labor to Capital

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Communist Economics

Part 6

Marx’s Wage-Labour and Capital:

Relation of Wage-Labour to Capital

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“What is it that takes place in the exchange between the capitalist and the wage-labourer? The labourer receives means of subsistence in exchange for his labour-power; the capitalist receives, in exchange for his means of subsistence, labour, the productive activity of the labourer, the creative force by which the worker not only replaces what he consumes, but also gives to the accumulated labour a greater value than it previously possessed.”

For our study, there are four points of interest: (1) the mechanics of “work,” (2) the transformational power of capitalism, (3) the attitude of the communist towards this capitalist power, and (4) the error of Marxian economics which underpins its fundamental weakness, in fact, corruption.

First, the mechanics of work is in barter. The laborer trades his energy, whether physical or mental (even if menial), for things of subsistence (food, water, shelter, fuel, forms of communication and transportation, clothing, and so forth), or an exchange method thereby (money). This work is necessary, whether one is a laborer, a capitalist, a farmer, a forager, or any other. Contrary to communist belief, the capitalist involves himself in risk, in entrepreneurial skills, in time investment, and in maintaining for the subsistence of his laborers, whether to keep them from malnutrition or from competing employers. It might be argued that some levels of capitalism, such as in banking, are less productive than those of pure labor, but the argument is meaningless. If the banker is extraneous, the marketplace of ideas will out that. It might be further argued that the capitalist system keeps the extraneous banker from marketplace obsolescence, essentially pillaring its own. This argument discounts that such pillaring is successful only if the marketplace accepts the concept of “banking.” Since the marketplace is in reality so disposed, there is little more to say on this but for an overall conspiracy. Now, it might be imagined that a banking consortium which controls the financial system of entire nations (that is, central banking) exists not from marketplace valuation, or perception thereof, but simply from a coerced method by which money is delivered to society. For example, it might be argued that the Federal Reserve of the United States is a beast which provides no benefit and sucks dry all labor, whether working class or capitalist. However, there are two counter-arguments of force: (1) that such central banking has provided through Keynesian capitalism (state capitalism) the means by which so many working class enjoy a relatively high lifestyle, and (2) that the marketplace has neither devised a better system of delivery for relatively high lifestyle nor embraced the antithetical communist lifestyle. Therefore, we know that in terms of work (exchanging labor for subsistence), central banking has expedited that which is both desired and “better.” This does not, however, excuse the excesses of central banking, including that of pilferage, manipulation of markets, exaggeration of boom-bust cycles, and government leverage.

Second, Marx has, wittingly or unwittingly, displayed the positive transformational power of capitalism, that is, “gives to the accumulated labour a greater value than it previously possessed.” When individualism is permitted by government, the creative natures of men are unleashed. When furthermore such creative natures are perpetuated through the legal defense of unique creations (through patents, copyrights, trademarks, etc), the result is the dispensation of invention upon mankind. Where capitalism thrives, these inventions become products, in time, as the cost of recapitalization is duly amortized, inexpensively distributed among the masses. There is, however, an important distinction between invention and product. When a man has an idea, or formulates a concept, but thereafter lets it remain hidden within the mind, or sequestered in secret papers, society partakes not. It is therefore that the acme of value in capitalism is the capitalist. For without the man of risk, of entrepreneurship, of dedication and determination, inventions remain novelties.

Third, Marx views and comments upon this transformational power of capitalism as something sinister, the exchange of labor for subsistence perceived to be and communicated as a form of slavery or ongoing trickery. Indeed, this thought process is essential for the communist, for only organized and national hatred against “exploitation of labor (the proletariat)” has the potential to upend capitalism. Thus, there is always a propaganda machine against capitalism. This does not ignore the favorable value of organized labor in successfully bringing to bear change against, say, unsafe practices, health menaces, or child labor. Nor does it ignore the more neutral aspects of wage and benefits negotiation. Yet, outside these realms for usefulness, organized labor is but an arm of communism, often banging a drum for wealth redistribution, at times provoking the dangerous general strike.

Fourth, Marx spouts an error which defies reason, calling labor “the creative force by which the worker not only replaces what he consumes.” This is incorrect. It is the capitalist who takes the relatively unformed and undirected energies of laborers, transforming these into powerful means of production and societal change. By implanting into the mind of the laborer that his labor is “creative,” Marx intends the capitalist to be expendable. However, without the capitalist, what is labor but a formless void? In fact, we know (clearly explicated in previous synopses) that it is the goal of communism to steal the means of capitalist production, not to create in the least any new type of facility, machinery, or even labor pool. That is, communism shall continue to utilize labor in the same uncreative manner, only with less reward for individual talent. Therefore, it is a false and manipulative flattery which Marx extends to that labor which is not creative.

“The labourer gets from the capitalist a portion of the existing means of subsistence. For what purpose do these means of subsistence serve him? For immediate consumption. But as soon as I consume means of subsistence, they are irrevocably lost to me, unless I employ the time during which these means sustain my life in producing new means of subsistence, in creating by my labour new values in place of the values lost in consumption. But it is just this noble reproductive power that the labourer surrenders to the capitalist in exchange for means of subsistence received. Consequently, he has lost it for himself.”

In locations where there exists no better means of subsistence, such work is by necessity (unless the society is not free, in which case it is slavery). Marx, however, ignores this necessity, focusing instead on an inequality, that the capitalist profits and amasses wealth while his laborers merely subsist.

Yet, the capitalist profits (and therefore subsists) by way of a relative genius in transforming unfocused labor into more valuable focused labor. In other words, it is a power of the brain, to conceive a better mousetrap, or better method to make a mousetrap, which profits. The communist, however, actually bemoans this “unfair” brainpower and profit thereof, labeling it as “exploitation” of the laborers employed. By such moaning, one should think the products and services of capitalism, those better mousetraps, to be without value, only existing to employ (or rather, exploit) laborers and to profit capitalists. This is the point. The communist cannot admit that capitalist goods and services have great value, not even by the perception of the marketplace, else the power to label those laborers as exploited (except under certain ruthless conditions) is lost. Nevertheless, by its written intention to seize the means of production, communism makes it known that capitalist goods and services do have great value.

Marx states also that the laborer, in surrendering himself to a never-ending cycle of labor-for-subsistence barter, “has lost it for himself.” Oddly, this is a statement of entrepreneurship! Yet, howbeit that the laborer should believe communism to endorse autonomy of the self, especially in financial terms, when such is not permitted for the capitalist? It is a lie of massive proportion.

“Let us take an example. For one shilling a labourer works all day long in the fields of a farmer, to whom he thus secures a return of two shillings. The farmer not only receives the replaced value which he has given to the day labourer, he has doubled it. Therefore, he has consumed the one shilling that he gave to the day labourer in a fruitful, productive manner. For the one shilling he has bought the labour-power of the day-labourer, which creates products of the soil of twice the value, and out of one shilling makes two. The day-labourer, on the contrary, receives in the place of his productive force, whose results he has just surrendered to the farmer, one shilling, which he exchanges for means of subsistence, which he consumes more or less quickly. The one shilling has therefore been consumed in a double manner – reproductively for the capitalist, for it has been exchanged for labour-power, which brought forth two shillings; unproductively for the worker, for it has been exchanged for means of subsistence which are lost for ever, and whose value he can obtain again only by repeating the same exchange with the farmer.”

This illustration omits the key point, that the labor of the day-laborer is unfocused energy, having no wage value at all, until the farmer gives it wage value through employment. That is, the day-laborer, sitting idle, collects no wage at all, his energy wasted (as it were). Only when the capitalist (here, the farmer) puts that energy to use is the mechanism of work engaged, labor being exchanged for subsistence. Therefore, it is not that the day-laborer in employment to the farmer has worked for half his value, or that the farmer has collected a full wage (being in this example equal to that of the day-laborer) for no work at all. Instead, both the farmer and day-laborer having needs, make a contract of honor, one to labor, one to pay for labor. The need of the farmer is implicit, in that he ostensibly cannot complete his tasks without the labor of the day-laborer. The need of the day-laborer is intrinsic, for he must subsist. The contract between them, being of necessity and honorable, is therefore no other man’s business.

Further, what shall we say of the money which is paid to the day-laborer? Where did the farmer get this money? Did he earn it? Steal it? Inherit it? Receive it from the central bank for nothing? Irrespective of source, the farmer is putting his own money (arguments of merit or morality notwithstanding) at risk by paying the day-laborer for his labor. What if the farmer decided to forego hiring the day-laborer, instead working himself in exchange for the right to retain his own capital for other times? In such case, the day-laborer is not “exploited” but neither does he subsist.

Thereby, whether the farmer hires or does not hire the day-laborer, the communist does not approve. If the day-laborer is hired, he is exploited. If the day-laborer is not hired, the farmer is heartless and greedy. Under such communist scrutiny, the capitalist farmer cannot win. Again, that is the point. The Hegelian dialectic employed for such argumentation is not designed for reason or compromise, only for dynamic movement to a synthesis. The farmer (capitalist) will always be the Oppressor, the day-laborer (proletariat) always the Victim, and communism always the Savior.

Marx also commits fraud, for he makes it that if the day-laborer had no immediate need for subsistence he might strike out on his own. This is presumptuous, for it not only assumes that the brainpower or gumption of every man is the same, but it also denies the right of the day-laborer to be a day-laborer, making it a derision. Perhaps some wish to be day-laborers!

Supposing, however, that a particular day-laborer does strike out on his own, and thereafter becomes a farmer with need for his own day laborers. Shall the communist then deem it unholy for that day-laborer-cum-farmer (beloved to this point by Marx) to become a hirer of day-laborers? If so, Marx is a liar, creating the fantasy that a day-laborer may become whatever he so desires. If not, Marx is a capitalist.

“Capital therefore presupposes wage-labour; wage-labour presupposes capital. They condition each other; each brings the other into existence.”

These preconditions of Marxian economics are somewhat foolish. First, an accumulation of wealth (capital) presupposes neither wage-labor to amass such wealth nor a waiting body of laborers to employ such wealth. For example, agricultural excess is not necessarily due to the labor of day-laborers, nor is agricultural excess existent based on any future day-labor. Marx here is caressing the strings of communism, serenading the working class with a song of outrage, that wealth exists at the expense of labor, or, more nearly, at the presumption of such expense. That is, capital is arrogant. Second, wage-labor is not predicated on capital. Using again the agricultural example, a day-laborer may work for a portion of that which he harvests, not for any pre-existing capital wealth. It might be argued that such is commission work, not day-labor, but this argument only pretends purity. In fact, day-laborers may work not for either wage or commission but instead for pure barter, such as room and board. Against this, the argument may be that room and board constitutes wage, but – ah! – it is not a redistribution of wealth.

The overarching argument is that commission and barter (such as room and board) comprise but few of the employer-employee relationships. However, this is a function of the marketplace, for the wage-laborer is, bluntly, the least ambitious laborer, the commission worker being of more confidence, the barter worker being of fewer material needs.

In essence, Marx has only administered the communist dialectic, to begin the argument, not to win it.

“Does a worker in a cotton factory produce only cotton? No. He produces capital. He produces values which serve anew to command his work and to create by means of it new values.”

More dialectic concerning unfairness and capitalistic hardheartedness. Again, this neglects that an idle laborer is paid nothing!

“Capital can multiply itself only by exchanging itself for labour-power, by calling wage-labour into life.”

Yes, capital can multiply itself this way, but not only this way. For example, the power of agriculture may cause capital to multiply itself, even without labor-power. The power of investment, whether in real estate or any other vehicle, may do likewise. It might be argued that such exceptions are extensions of labor-power exchange, but this addresses not the so-called exploitation of labor. For if an investment becomes more valuable due to an increase in buyers for that investment, this denotes, if not necessitates, some commensurate increase elsewhere.

But if one asks where this commensurate increase originates, the current state of capitalism must not be excluded for the sake of historical connection with Marx. Specifically, the increase so mentioned may be in credit, such as in the ability to mortgage one’s home in order to fund a start-up business. One might say that mortgages are enslavement to banking, an exchange of future labor-power for current capital, but this ignores the positive aspects of such capitalization, including freedom from wage-labor per se, even the possibility of full “financial freedom.”

“The labour-power of the wage-labourer can exchange itself for capital only by increasing capital, by strengthening that very power whose slave it is. Increase of capital, therefore, is increase of the proletariat, i.e., of the working class.”

True, the wage-laborer is, more than all others, a “slave” to his employer. This is, however, a reflection of both societal needs and innate brainpower. Simply, capitalists desire wage-laborers, and many people are happy enough to be wage-laborers. In this, there is no wrongdoing if both sides are fairly treated, according to their contracts made. The power of the labor union has, in fact, made the wage-laborer at various times quite respected. For many decades, the American auto worker, with his generous wage and benefits package, was the envy of the working class.

That wage-labor creates more capital, and therefore more proletariat, is in many cases an improvement for that proletariat. Where there is corruption, however, the proletariat requires to still organize for basic dignity. But where there is prosperity and, in the main, fairness, this Marxian diatribe only creates envy and class warfare. This is, of course, the point, for communism seeks not to reform capitalism but to destroy it.

“And so, the bourgeoisie and its economists maintain that the interest of the capitalist and of the labourer is the same. And in fact, so they are! The worker perishes if capital does not keep him busy. Capital perishes if it does not exploit labour-power, which, in order to exploit, it must buy. The more quickly the capital destined for production – the productive capital – increases, the more prosperous industry is, the more the bourgeoisie enriches itself, the better business gets, so many more workers does the capitalist need, so much the dearer does the worker sell himself. The fastest possible growth of productive capital is, therefore, the indispensable condition for a tolerable life to the labourer.”

Marx has confessed some truth, that the most expedient factor for successful capitalism is the happy laborer. The more success, the more happy laborers. This seems nearly ideal. Yet as we know, communism does not exist to laud capitalism but to bury it. The happy laborer is not to Marx a positive, but is instead a sign that capitalism has bought the soul of the working class.

“But what is growth of productive capital? Growth of the power of accumulated labour over living labour; growth of the rule of the bourgeoisie over the working class. When wage-labour produces the alien wealth dominating it, the power hostile to it, capital, there flow back to it its means of employment – i.e., its means of subsistence, under the condition that it again become a part of capital, that is become again the lever whereby capital is to be forced into an accelerated expansive movement.”

According to Marx, industrial progress is not the manner by which the proletariat rise but rather are ground down. Under communism, the proletariat are, per Marx, without goals, without brainpower, without heart, without ambition. Marx furthermore excludes any possibility that the wage-laborer might change his circumstances by saving wages for capital, or by jumping to commission work, or by moving to a different location, and so forth. Yet, if the wage-laborer is without such talents or skills, ought not he be content rather than malcontent? Not so for the communist, who heckles the wage-laborer into resenting his employment, encouraging an entire overthrow of the capitalist system, which is to be replaced with... those same means of production, only under communism!

“To say that the interests of capital and the interests of the workers are identical, signifies only this: that capital and wage-labour are two sides of one and the same relation. The one conditions the other in the same way that the usurer and the borrower condition each other.”

Note the bloodsucking relationship Marx draws between capitalist/laborer and usurer/borrower. This is intentional, to stoke the coals of hatred and envy. But there also is a deeper meaning, for the “usurers” were and are, according to European thinking, the Jews. This planted seed from Marx is meant to cause umbrage against the Jews but also, more to the point, against Judaism, specifically against the Law of God (Torah), that protector of Life, Liberty, and Private Property.

“As long as the wage-labourer remains a wage-labourer, his lot is dependent upon capital. That is what the boasted community of interests between worker and capitalists amounts to.”

The wage-laborers, that endless pool of the working class, who refresh daily with youthful recruits, and who maintain by their own limitations, are by Marx poked constantly. Remarkably, many proletariat respond favorably to the communist jabs, seeing such as alarm bells. But what has been achieved by this awakening? For the wage-laborer, it is a net negative, the former bliss becoming resentment towards his employer, or envy against his neighbor’s wealth (capital). One might argue that awake is better than asleep, but to what end? The communist endgame is merely to utilize the laborer under a different guise, promising met needs in exchange for allegiance. Is communism capable to do this? The rhetoric is that communism trumps capitalism by relieving short economics, that is, by removing the anxiety of the poor. The ideology, however, cannot justify such rhetoric. Further, the reality for every nation embracing this communist ideology has not been relief, but instead quite the opposite.

“If capital grows, the mass of wage-labour grows, the number of wage-workers increases; in a word, the sway of capital extends over a greater mass of individuals.”

This capitalist “sway” has in times past been a blessing, but sometimes has run amok in corruption. Nevertheless, collectivism has most often (if not always) been multiple times worse than the excesses of individualist capitalism.

“Let us suppose the most favorable case: if productive capital grows, the demand for labour grows. It therefore increases the price of labour-power, wages.”

“A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut. The little house now makes it clear that its inmate has no social position at all to maintain, or but a very insignificant one; and however high it may shoot up in the course of civilization, if the neighboring palace rises in equal or even in greater measure, the occupant of the relatively little house will always find himself more uncomfortable, more dissatisfied, more cramped within his four walls.”

And so Marx, with no particular place to go economically, resorts to that moralistic argument. Capitalism paves the way for success which may provoke envy, and therefore Marx means it to be the mechanism for social unrest. But the size of one’s home is not the ultimate fount of inner peace or happiness. If one is therefore “more uncomfortable, more dissatisfied, more cramped,” it is not the relative size of the neighbor’s house which causes such angst and resentment, but it is corruption of the soul.

This brings us to God’s Law (Torah). It is sin to covet your neighbor’s house, to desire (1) to take that house from that neighbor (“I must have your property”), or (2) to destroy that neighbor’s house (“If I can’t have it, neither can you”). It is plotting to steal. Marx teaches against God’s Law, which is the same as teaching to sin. According to Christ, such teaching makes a person to be called “least” (Matthew 5:19).

Keep in mind, however, that Marx utilizes dialectic to start a discourse against Torah, the aim (synthesis) being to destroy morality. Once morality is destroyed, God can then be supplanted. The matter of faith is insignificant in relation to this, for once the state creates the ultimate rules for fair play, that is, moral law, the state is in fact a god.

“An appreciable rise in wages presupposes a rapid growth of productive capital. Rapid growth of productive capital calls forth just as rapid a growth of wealth, of luxury, of social needs and social pleasures. Therefore, although the pleasures of the labourer have increased, the social gratification which they afford has fallen in comparison with the increased pleasures of the capitalist, which are inaccessible to the worker, in comparison with the stage of development of society in general. Our wants and pleasures have their origin in society; we therefore measure them in relation to society; we do not measure them in relation to the objects which serve for their gratification. Since they are of a social nature, they are of a relative nature.”

Marx, still away from economics, moves from argument of morality to one of sociology. While acknowledging that “all boats rise” during economic good times, Marx nevertheless notes a distracting difference between the big boats and the small ones. Rather than focus upon the positive of increasing lifestyle and more humane conditions for all, he inhibits pleasure by pointing to the “pain” of having a smaller measure of good things. This is not an uncommon or unknown complaint, for many are jealous of their portion, even if all other things be equal. Marx takes this to its ultimate communist conclusion, however, that jealousy towards apportionment is natural, for “our wants and pleasures have their origin in society; we therefore measure them in relation to society; we do not measure them in relation to the objects which serve for their gratification.”

In essence, society, the superstructure, is blamed. According to communism, it is religion (that is, Torah) and the family, main beams of the capitalist superstructure, which particularly must be held accountable for stirring up the natural tendencies of men to covet. The implication is that under communism, coveting disappears. That is, without morality comes superior morality!

“But wages are not at all determined merely by the sum of commodities for which they may be exchanged. Other factors enter into the problem. What the workers directly receive for their labour-power is a certain sum of money. Are wages determined merely by this money price?”

Marx returns abruptly from morality and sociology.

“In the 16th century, the gold and silver circulation in Europe increased in consequence of the discovery of richer and more easily worked mines in America. The value of gold and silver, therefore, fell in relation to other commodities. The workers received the same amount of coined silver for their labour-power as before. The money price of their work remained the same, and yet their wages had fallen, for in exchange for the same amount of silver they obtained a smaller amount of other commodities. This was one of the circumstances which furthered the growth of capital, the rise of the bourgeoisie, in the 18th century.”

First, those laborers who chose to stay with mining rather than jumping to, for example, agriculture, ought not be viewed as exploited but rather as working within the limits of both their talents and circumstances.

Second, as mining became affected, those metallic commodities became of lesser “value” than before, and capitalist investors therein, whether principals or investors, took a loss of “wage” equal to or greater than that of the laborer.

It might be argued that such miners, though paid, were no more than slaves. If so, they were slaves of totalitarianism, not capitalism, which only exists under freedom and fairness. For where true capitalism ends, tyranny begins.

“Let us take another case. In the winter of 1847, in consequence of bad harvest, the most indispensable means of subsistence – grains, meat, butter, cheese, etc. – rose greatly in price. Let us suppose that the workers still received the same sum of money for their labour-power as before. Did not their wages fall? To be sure. For the same money they received in exchange less bread, meat, etc. Their wages fell, not because the value of silver was less, but because the value of the means of subsistence had increased.”

This seemingly credible argument has many flaws. First, whether under communism or capitalism, the harvest would have been “bad.” Second, the price of subsistence (inflation) rises in accord with the needs of the producer, in this case the farmer. For if the harvest is bad, the farmer must, in order to keep his farm financially viable, raise his prices on that which he has to offer. If the argument is that the farmer should bear this brunt also, it follows that a central authority must be established to force the farmer into such an agreement. Otherwise, the farmer may as well retain his crop for himself. Third, a severe rise in the price of subsistence can only be alleviated by central authority (communism) or by charity (Torah). Since capitalism supposedly is the cause for all inflation, the Marxian ploy here is to present communism as the only reasonable option. Fourth, if the price of subsistence rises, is it not that certain segments of society benefit? For example, though the retailer makes but little profit on his meats, is he not still profiting, and will not his profit purchase more goods once prices alleviate? This is the true nature of capital, that it fluctuates in stature, and therefore has dynamic power to flow through society, strengthening or weakening as it goes. This dynamism motivates creative productivity, for the entrepreneur has optimism that his capital will not only increase but also gain buying power during particular times. In contrast, the “idealized” communist state can never motivate anyone, being a static mass of equations, that one bushel of wheat equals a particular amount of corn, and so forth. This type of fixed pricing disregards supply and demand. The actual communist state, on the other hand, does regard supply and demand, especially that which affects their central command!

“Finally, let us suppose that the money price of labour-power remained the same, while all agricultural and manufactured commodities had fallen in price because of the employment of new machines, of favorable seasons, etc. For the same money the workers could now buy more commodities of all kinds. Their wages have therefore risen, just because their money value has not changed.”

When prices fall due to some favorable condition, it is the nature of competition more so than demand. As such, lower prices beget even lower prices. The marketplace steadies such fluctuations by default. Buyers gravitate to price and quality, choosing winners and losers. Eventually, those business entities which cannot survive lower pricing must fold, and therefore the unemployed pool grows. Necessarily, this loss of competition levels pricing also, and therefore the good times of relative low prices eventually come to an end.

Marx makes it appear, however, that such wonderful conditions may under communism continue unabated. This is untrue for two reasons: (1) communism has no place for competition, and therefore recognizes no such thing as “low” pricing, and (2) communism is not concerned with wages, and therefore “buying power” is just a lollipop fantasy under that system.

“The money price of labour-power, the nominal wages, do not therefore coincide with the actual or real wages – i.e., with the amount of commodities which are actually given in exchange for the wages. If then we speak of a rise or fall of wages, we have to keep in mind not only the money price of labour-power, the nominal wages, but also the real wages.”

Communism has no goal to reform capitalism. This therefore is only dialectic.

“But neither the nominal wages – i.e., the amount of money for which the labourer sells himself to the capitalist – nor the real wages – i.e., the amount of commodities which he can buy for this money – exhausts the relations which are comprehended in the term wages. Wages are determined above all by their relations to the gain, the profit, of the capitalist. In other words, wages are a proportionate, relative quantity.”

Marx makes three points here: (1) that “nominal” wages include a loss of self-worth, (2) that “real wages” include a loss of buying power, and (3) that “relative” wages are disproportionate in relation to profit.

What is a proportionate and proper relative wage?

Supposing a capitalist hires four laborers at $30,000 gross per year each, and profits himself at $90,000 gross (after recapitalization and other business expenses). What if the capitalist were forced to share his “excess” ($60,000) among the five (including himself)? Each laborer would receive an extra $12,000 (60,000 divided by 5), bringing each total to $42,000. In theory, this seems quite equitable. In reality, there are numerous problems. First and foremost, what motivates to keep the capitalist in business? If his goal is $90,000 and he meets it, he is satisfied. If he reaches only $42,000, the capitalist is neither happy nor driven. Thereby, the business may be abandoned, the capitalist retreating to some other venture, or perhaps to wage-labor himself. If so, his laborers are now unemployed. This benefits no one.

Let’s look at a more skewed example. Supposing a CEO for a multinational corporation receives $12M (million) per year. Should instead he receive some different arbitrary amount, say, $5M, and the remaining $7M be distributed amongst the corporate employees? If so, who makes such a decision? If the answer to this is “the corporation,” why should the CEO not receive $12M? If the answer is instead “society,” what does that mean? Will a pamphlet of such standards be published? Who will decide the standard? Eventually, this devolves down that a small elite shall set wage levels for all. This is fascism.

Communism takes a more drastic view. The CEO is considered superfluous, so he receives nothing. He is replaced by a committee. These committee members are, of course, a bit more privileged than the average comrade, and therefore will receive a certain amount more ration than their laborer counterparts. But what is a committee? Is it not a board of directors? Who then is head? If nobody, what are the rules of the committee? Who makes these rules? In this regard, communism can be no more than a more pointed and dangerous form of corporatism, the CEO a tyrant who makes himself to appear benevolent (and furthermore expects such due praise). He is “dear leader” and is, essentially, a god.

If there is a moral here, it is that inequality under capitalism is far preferable to “equality” under communism.

“Real wages express the price of labour-power in relation to the price of commodities; relative wages, on the other hand, express the share of immediate labour in the value newly created by it, in relation to the share of it which falls to accumulated labour, to capital.”

According to Marx, “real wages” are an indicator of buying power. This simply means one’s wages look better when goods and services cost less, and look worse when goods and services cost more. Necessarily, this perception is relative to the level of one’s actual lifestyle, but also is enabled further by the level of lifestyle one desires. Since such perception is possible only under capitalism, the solution from Marx is to obliterate the capitalist marketplace. Under communism, envy and anxiety would thus be absent, replaced by across-the-board mediocrity. This is imagined to be appealing.

“Relative wages” are, Marx asserts, a percentage of labor wage-plus-capitalist profit. If you earn $10 per hour, but the boss earns $20 per hour, you have sold yourself for 33% of your value. Naturally, this excludes the idea that the boss should make anything at all. If, however, the boss is included as a productive worker, his “share” being also, under communist thought, $10 per hour, the relative wage is now calculated as 50%.

We come now to the punch line, namely, that these Marxian formulae and pontifications are all but mere dialectic. For it is not that communism demands the removal of capital profit for the equalization of wages, but rather for the destruction of wealth accumulation, that is, of capital, or, private property. This is the primary and cardinal ordinance of communism, never to be forgotten in discussion with any socialist or communist.

Lesson 25: Communist Economics 5: Capital

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Communist Economics

Part 5

Marx’s Wage-Labour and Capital:

The Nature and Growth of Capital

Many scholars think Marxian economics difficult to understand. Not true. One must only be able to discern between factual reasoning and communist dialectic. This skill (or art, if you like) is vital when engaging any communist.

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“Capital consists of raw materials, instruments of labour, and means of subsistence of all kinds, which are employed in producing new raw materials, new instruments, and new means of subsistence. All these components of capital are created by labour, products of labour, accumulated labour. Accumulated labour that serves as a means to new production is capital.”

In the nature of things, this is correct. Capital is in fact a reservoir of asset, many times built from a period of labor. For the new entrepreneur, that labor had likely been in service to another until a point of separation into some independent venture. For the established businessman, that labor was provided to him by others, nevertheless at some risk to and personal time commitment from the capitalist. Yet, labor is not the only means of capitalization, for there is also credit, that bankroll which comes not necessarily from collateral, but, depending on the economic and financial framework extant at the time, from some measure of fractional banking, that is, of imaginary money. Capitalism may therefore be of pure labor and asset (in whichever proprietorship, partnership, or corporation suits the venture), or it may be intermingled with interactions amongst government-sponsored financiers (for fractional banking is not possible without state sanction).

“So say the economists.”

Marx does not actually believe in the aforementioned principles of capitalism, or rather, in its moral fiber. Thus begins the dialectic.

“What is a Negro slave? A man of the black race. The one explanation is worthy of the other. A Negro is a Negro. Only under certain conditions does he become a slave. A cotton-spinning machine is a machine for spinning cotton. Only under certain conditions does it become capital. Torn away from these conditions, it is as little capital as gold is itself money, or sugar is the price of sugar.”

This opens a philosophical and philological argument, which is whether things are what they, or whether they are defined by their employment. The point, however, is moot. When things are utilized for purposes, they retain their original essence but also transcend to another state. A cow is not food until processed for meat, which is bovine in any case. A very simple point, unarguable.

“In the process of production, human beings work not only upon nature, but also upon one another. They produce only by working together in a specified manner and reciprocally exchanging their activities. In order to produce, they enter into definite connections and relations to one another, and only within these social connections and relations does their influence upon nature operate – i.e., does production take place.”

Production is dependent upon human relationships. Vague, therefore without controversy.

“These social relations between the producers, and the conditions under which they exchange their activities and share in the total act of production, will naturally vary according to the character of the means of production. With the discovery of a new instrument of warfare, the firearm, the whole internal organization of the army was necessarily altered, the relations within which individuals compose an army and can work as an army were transformed, and the relation of different armies to another was likewise changed.”

Human (social) relationships change according to the tools which are available. True historicity claimed as Marxian dialectic, but nevertheless general enough to avoid perversion.

“We thus see that the social relations within which individuals produce, the social relations of production, are altered, transformed, with the change and development of the material means of production, of the forces of production. The relations of production in their totality constitute what is called the social relations, society, and, moreover, a society at a definite stage of historical development, a society with peculiar, distinctive characteristics. Ancient society, feudal society, bourgeois (or capitalist) society, are such totalities of relations of production, each of which denotes a particular stage of development in the history of mankind.”

A summation of true things, hardly revelatory, and not in the least subversive, but it is a setup.

“Capital also is a social relation of production. It is a bourgeois relation of production, a relation of production of bourgeois society. The means of subsistence, the instruments of labour, the raw materials, of which capital consists – have they not been produced and accumulated under given social conditions, within definite special relations? Are they not employed for new production, under given special conditions, within definite social relations? And does not just the definite social character stamp the products which serve for new production as capital?”

Having adopted a few truisms, with some sly winks askance, Marx now opens the book of doctrine, and there are consequently a few errors. First, the “social relation” under which Marx applies capital is overly limiting, likely deliberately so. Under Keynesian (our current) capitalism, the system is extended past a “bourgeois” social relation (connected to, for example, generational landholding), permitting the working class to own quality property (without even the collateral of hard assets!) and to enjoy a standard of living which is the envy of the world (but whether or not a system of Keynesian capitalism is able to stand forever is another discussion). One might argue that this social relation of capital, though changed from Marx’s original vision, is still necessarily limited, but this argument takes a static view of human economics, conveniently ignoring the possibility of further developments, and is therefore pointless.

Second, Marx holds a bias against the capitalist superstructure, this causing him to insist readers redefine reality for the sake of his ideology/philosophy. For whether or not the means of production should be labeled “capital” is besides the point, in fact, outside the scope of systemic ken. It is what it is. Marx’s negative proposition is thus only a flirtation with subversion.

But to his question, “And does not just the definite social character stamp the products which serve for new production as capital?,” the answer is No. What must also deserve consideration is the quantification of what is, and what is not. For outside of capitalist structure, the means of production are still the means of production. Have not Marx and Engels already acknowledged that the tools and factories of capitalism shall be seized by and thereafter utilized for the purposes of communism? Of course! Communism shall operate in the same manner as capitalism, only with central governance rather than under individualistic authority and entity. It is thus that the means of production have intrinsic value not defined or settled by capitalism alone, but rather by the whole of humanity, and this intrinsic value is diluted only through individual taste (as for or against, e.g., a toy factory). Capital is therefore of universal appeal and utility, even to the communist. It is only a matter of acquiring it!

“Capital consists not only of means of subsistence, instruments of labour, and raw materials, not only as material products; it consists just as much of exchange values. All products of which it consists are commodities. Capital, consequently, is not only a sum of material products, it is a sum of commodities, of exchange values, of social magnitudes. Capital remains the same whether we put cotton in the place of wool, rice in the place of wheat, steamships in the place of railroads, provided only that the cotton, the rice, the steamships – the body of capital – have the same exchange value, the same price, as the wool, the wheat, the railroads, in which it was previously embodied. The bodily form of capital may transform itself continually, while capital does not suffer the least alteration.”

While capital itself is interchangeable among the many commodities, those commodities are not equal. Some are perishable (foodstuffs), some not (gold). Some are portable (currency), some not (skyscrapers). Some have universal appeal (cotton), some not (collectibles). Thereby, we find that capital may become eroded or multiplied during the investment period, that is, while it has embodiment. This is the nature of a market, a concept which either eludes or irritates Marx.

“But though every capital is a sum of commodities – i.e., of exchange values – it does not follow that every sum of commodities, of exchange values, is capital.

Every sum of exchange values is an exchange value. Each particular exchange value is a sum of exchange values. For example: a house worth 1,000 pounds is an exchange value of 1,000 pounds: a piece of paper worth one penny is a sum of exchange values of 100 1/100ths of a penny. Products which are exchangeable for others are commodities. The definite proportion in which they are exchangeable forms their exchange value, or, expressed in money, their price. The quantity of these products can have no effect on their character as commodities, as representing an exchange value , as having a certain price. Whether a tree be large or small, it remains a tree. Whether we exchange iron in pennyweights or in hundredweights, for other products, does this alter its character: its being a commodity, or exchange value? According to the quantity, it is a commodity of greater or of lesser value, of higher or of lower price.”

Rubbish! A tree is not a tree, but there is oak, maple, larch, walnut, apple, and so forth, all with different qualities and perceived values. Further, an oak tree is not an oak tree, but has differing quality and value from example to example, one bringing a higher or lower price. This applies not only to the animal and vegetable but also to the mineral, the brilliance and clarity of diamonds, or the firepower of bituminous, being two such examples..

But if Marx is saying that value ought not be applied based on personal preferences but instead on utilitarianism, this is the difference between capitalism and communism. For the communist is not (in practice) concerned with whether one person desires a different quality of oak than another, but that it should be enough the oak is supplied at all! Under communism, the market is not considered, except as a mass of units to be serviced adequately. Thus, the mediocrity of communist economics, and of its products and services.

“How then does a sum of commodities, of exchange values, become capital? Thereby, that as an independent social power – i.e., as the power of a part of society – it preserves itself and multiplies by exchange with direct, living labour-power.

The existence of a class which possesses nothing but the ability to work is a necessary presupposition of capital.”

This is a great leap, predicated mostly on faith. First, this notion that commodities are useful as capital only to motivate labor is quite arrogant. If the agriculturalist utilizes his commodity not in exchange but to self-sustain, not only is Marxism pierced economically but also ideologically, for the farmer who keeps the majority of his harvest for himself is an individualist, not interested in the collective good. This obvious example may be applied to other and different economic sectors. What then? Marx has traded his integrity in pure economics for envy over particular financial mechanisms.

Second, his arrogance leads to an awkward propaganda. “The existence of a class which possesses nothing but the ability to work” is sheer liability. But even should we accord Marx the ignorance of his time, he has dehumanized the very class which he claims is dehumanized! One might suppose that a class so demeaned would fight against this categorization and further denigration, but Marx’s proletariat often has found comfort with this type of savior, who accurately articulates their frustration but also with vapidity causes them to become a pitiable caricature.

Third, the representation of capital as being almost completely reliant upon the existence of a marginalized working class has basis in reality only where such conditions exist. It is cherry-picking at excess to prove the unworthiness of capitalism in entirety. Worse, Marx indulges again in hypocrisy. For as we have examined in previous installments, communism not only requires the same work ethic as capitalism, but concerning participation and mindlessness, its stricture is more zealous and cruel.

“It is only the dominion of past, accumulated, materialized labour over immediate living labour that stamps the accumulated labour with the character of capital.”

Marx concludes his case that accumulated wealth is a master over slaves. This theme ignores many influences which have shaped the world since Marx, including the ability of men to excel past their stations, the mobility of the working class, and the elevation of living standards through technology.

“Capital does not consist in the fact that accumulated labour serves living labour as a means for new production. It consists in the fact that living labour serves accumulated labour as the means of preserving and multiplying its exchange value.”

According to Marx, capitalism does not serve its servants, that is, the working class, but rather breeds, exploits, and finally tosses away these slaves. This is accomplished for the sake, and by means, of expanding power and greed.

The boundary is settled, and one must choose between the bourgeois and the proletariat, between capitalism and communism. No middle ground is given, and this deliberately so (and we agree this is necessary and proper). Yet, due to those glaring errors and omissions already noted, even a passing adherence to Marxism is fraught with danger. Caution is, however, overthrown by those who await a salvation from their dehumanization, ready to embrace folly and death.

Lesson 24: Communist Economics 4: Wages

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Communist Economics

Part 4

Marx’s Wage-Labour and Capital:

By What are Wages Determined?

We continue this week plumbing the depths of Marxian economics. As you read, keep in mind that the foundational beliefs herein are almost identical to chanting from Occupy, to liberal pontifications within Congress, and to whining from assorted bleeding hearts. Sadly, neither the failures of socialism nor the excesses of so-called communist nations have dulled the appetite for this tripe. Thus, it is in our best interests to know these things intimately, for we shall see and hear them daily.

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“Now, the same general laws which regulate the price of commodities in general, naturally regulate wages, or the price of labour-power. Wages will now rise, now fall, according to the relation of supply and demand, according as competition shapes itself between the buyers of labour-power, the capitalists, and the sellers of labour-power, the workers. The fluctuations of wages correspond to the fluctuation in the price of commodities in general.”

Marx incorporates an integral error, and I think intentionally. First, the error is actually compound. It begins with the notion that commodities prices revolve to great degree around “general laws.” As explained in the previous installment to this series, Marx has misapplied or greatly exaggerated such so-called laws. The continuation of the error is that wages, given some measure of analogy to commodities prices, are subject to those same general laws. Such supposition negates the wide variety of human interaction, but more importantly also ignores our experience with capitalism, which provides that competition among employers for the best laborers, especially in times of low unemployment, greatly distorts static, especially Marxian, valuation systems. It might be argued with some force that mine is merely an offshoot description for the law of supply and demand. At some base level, this is true, but such argument oversimplifies the inherent complexity of wage fixing in the same manner that Marx oversimplifies valuations to be intrinsic, that is, mechanical. Thereby has Marx given a subtle yet open condemnation of capitalism, forming foundation for that primary Marxist grievance, the dehumanization of the laborer. By the suggestion that the valuations of capitalism shackle human labor as an ox to the plow, whatever follows from Marx is meant to appear as liberating, as a Savior of the Victim proletariat from the Oppressor capitalist. The laborer has been demeaned, is angry, and ostensibly is ready to rise up. This is not only (proper) Hegelian dialectic but also deliberate psychology laid by Marx.

“But within the limits of these fluctuations the price of labour-power will be determined by the cost of production, by the labour-time necessary for production of this commodity: labour-power. What, then, is the cost of production of labour-power? It is the cost required for the maintenance of the labourer as a labourer, and for his education and training as a labourer. Therefore, the shorter the time required for training up to a particular sort of work, the smaller is the cost of production of the worker, the lower is the price of his labour-power, his wages.”

Grossly misstating economic theory, Marx intends to align the proletariat as slaves. Marx ignores his own first rule of supply and demand. For if education, whether of college, vocational school, or on-the-job training, sets the price of labour-power, it cannot be that supply and demand thwarts such an equation. If many students train to be attorneys, the resulting glut of lawyers in no way lowers the cost to hire, for one is employing expertise (and reputation). The same may be said for the machinist, the physician, or any other skilled laborer. Thus, while Marx has the right idea concerning the duration of education as an arbiter and forecaster of future wages, he cannot otherwise prove that case as against the price of proletariat labor-power. If there are 10,000 applicants for the same unskilled laborer position, the one who is hired is likely to be the best-trained and therefore to command the best salary also. The employer who would hire the cheapest labor often finds side-effects such as sloppy workmanship, poor moral character, and insubordination to be insufferable, and soon in turn becomes one who hires the best worker, not the least costly.

This detail of Marxian economics is further debilitated when one considers that under capitalism is a constant stream of new would-be entrepreneurs who, being ignorant of the pitfalls, do in fact hire cheap labor. This is actually a blessing to the labor marketplace, for without such neophyte businessmen those worse laborers would remain unemployed, creating for society even worse problems, whether welfare, crime, or vagrancy. A strong capitalist system is thus the wisest of frameworks. It could be argued that, by permitting inexperienced shop-owners to proliferate, capitalism causes a vast number of laborers to remain unskilled and therefore low-wage, barely able to make ends meet, little more than slaves. This assumes many things, primarily that capitalism would be of far greater value if it were smartly regulated. But the more regulated, the less capitalist, that is, the more fascist, for it takes an elite (does it not?) to opine wisely upon the standards which must be best for all. Clearly, the argument is meant to spur conversation over which central governance system is best capable to snuff out the inefficiencies of capitalism. Those inefficiencies, however, reflect inherent freedom, including freedom to fail, whereas the “efficiency” of communism is in its totalitarianism.

“In those branches of industry in which hardly any period of apprenticeship is necessary and the mere bodily existence of the worker is sufficient, the cost of his production is limited almost exclusively to the commodities necessary for keeping him in working condition. The price of his work will therefore be determined by the price of the necessary means of subsistence.”

The assumption is that the very unskilled laborer, for example, one who wheelbarrows materials from one place to another, is likely to earn less per hour (to choose a duration) than the more skilled laborer, for example, a carpenter. Who shall deny this? Yet this is not indicative of inequality. It is not even a matter of deservedness. For the unskilled worker is NOT a lesser quality of the same commodity but is a DIFFERENT commodity than the skilled worker! The comparison of skilled to unskilled laborer is as silk to cotton. They serve different needs, and in actuality are related in price only as pegged to a common currency. There is not an employer in the world who would knowingly hire an architect by trade to replace a licensed electrician, or vice versa (unless both skills were within that particular person). By the same token, if two electricians apply for the same position, no sane employer hires for the same wage the electrician of lesser skill (except perhaps for nepotism’s sake). The upshot here is that if Marxist economics demands equalization of wage irrespective of skill, it ignores reality.

If a highest wage is desired, it is the responsibility of a laborer to become as skilled as possible in his chosen field. However, the unskilled laborer, Marx accuses, is only able under capitalism to barely get by, having no hope for improvement or advancement. It is thus all desolation and alienation, horror and sadness. The goal of Marxism is to stoke such pathos, to exacerbate it to resentment, to express it as grievance, and finally to organize it into revolution.

But was Marx right? Is the unskilled worker destined only for hardship? In the main, the growth of capitalism has generated more opportunity and a better lifestyle for the majority, that is, for the working class. One might complain that the boom-bust cycles of capitalism (including and especially the housing collapse from 2008) cause ruin, but this complaint is actually against the Keynesian expansion of money supply, not against free entrepreneurship. To win this argument, the Marxist must invoke a false dialectic.

“Here, however, there enters another consideration. The manufacturer who calculates his cost of production and, in accordance with it, the price of the product, takes into account the wear and tear of the instruments of labour. If a machine costs him, for example, 1,000 shillings, and this machine is used up in 10 years, he adds 100 shillings annually to the price of the commodities, in order to be able after 10 years to replace the worn-out machine with a new one. In the same manner, the cost of production of simple labour-power must include the cost of propagation, by means of which the race of workers is enabled to multiply itself, and to replace worn-out workers with new ones. The wear and tear of the worker, therefore, is calculated in the same manner as the wear and tear of the machine.”

Dehumanization complete. According to Marx, the unskilled laborer is to the capitalist no more than a machine, to be depreciated, amortized, repaired, and finally replaced. If one had any doubt of Marx’s intentions, here they are on full display. That he lumps the proletariat as a “race” is of twofold aim: (1) to cause the unskilled laborer great angst for this divide, and (2) to stir superior feelings of pride for this race, as if an actual ethnic quantity, a real nationalism. This beaming pride in one’s own supposed exploitation, combined with a bias against those who would achieve higher than proletariat status, constitutes a type of reverse elitism, a hallmark of red philosophy (their elitist and fascist power structures notwithstanding).

Cries for “economic justice” are based upon this principle. Yet, they do not seek “justice” but a tribute for being unskilled, even proudly so. The redistribution of wealth towards those who have not achieved is not limited to helping widows and orphans, per scriptural commandment, but is for any who are below a certain level of means. Even here, however, there is not truth but only disguise and subterfuge. For the true underbelly of this beast is the destruction of the capitalist system which permits and spreads inequality. It is not reparations which are sought but permanent destruction of capitalist means. Accumulated wealth is to be spread in such a way that it no longer has power. Private property, the repository for accumulated wealth, shall be no more. There will no method by which capitalization is possible. It will be a permanent emasculation. The outcry for such redistribution derives from that aforementioned grievance, the supposed dehumanization of the unskilled laborer (proletariat), which in actuality is but pure coveting.

Naturally, in order to carry out such plans, it will be necessary for the communist to remove that protector of private property, the gun. This explains America’s resistance to communism. For it is not that Americans reject free handouts, personal bailouts, easy credit, or fiat currency, but only that the sheer number of small arms in private hands makes it impossible for those collectivists in power to collateralize its welfare state with private real estate. Simply, the Second Amendment has saved the United States from its complete implosion. Even one gun protecting private property makes it that much more difficult for the communist to seize property by force.

“Thus, the cost of production of simple labour-power amounts to the cost of the existence and propagation of the worker. The price of this cost of existence and propagation constitutes wages.”

The deeper meaning from Marx is that the capitalist system maintains as an incubator for unskilled labor. Wages are only high enough to promote subsistence, and therefore the children of such laborers, having no recourse to any higher learning or means to different venue, also fall prey to the same cycle. This is Marx’s universe of victimization. This does not preclude that entire families have never raised themselves above a certain low bar, or even that whole towns have remained in a type of economic grip. Nevertheless, it is not Marx’s purpose to fix such capitalistic excesses but to overthrow that system entirely. This shall ironically come by seizing the means of production so that the products and services which capitalism made ubiquitous, if not invented, will continue unabated! And in this utopia shall the existence of the worker, who shall still be a worker, become even more materialistic (though in reality no such thing has ever followed any proletariat revolution).

“The wages thus determined are called the minimum of wages. This minimum wage, like the determination of the price of commodities in general by cost of production, does not hold good for the single individual, but only for the race. Individual workers, indeed, millions of workers, do not receive enough to be able to exist and to propagate themselves; but the wages of the whole working class adjust themselves, within the limits of their fluctuations, to this minimum.”

Again, Marx invokes the pride of “race” as a means by which the working class, through some particular talent, or perhaps only by survival skill, shall overcome the nebulous evil of the “minimum wage.”

This minimum wage, already described by Marx as a level of subsistence exaggerated through a supply and demand mechanism, and also by some barrier against proletariat education or training, is a brief point of contention. For it is not truly wages which Marx seeks to reform but the idea of wages, that is, the idea of capitalist exploitation of labor. Wages are only the pivot point of current reality by which to generate hostility against it enough to smash it. What shall replace wages? “To each according to his needs...”

“Now that we have come to an understanding in regard to the most general laws which govern wages, as well as the price of every other commodity, we can examine our subject more particularly.”

The “understanding” is a communist one.

Lesson 23: Communist Economics 3: Commodity Prices

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Synopsis of Week 23

Communist Economics

Part 3

Our entire Western structure is at risk due to a 100-year+ participation in communism. Since we live in a society of easy credit, fiat currency, inordinate interest rates, bailout, handouts, and entitlements, and so forth, there is a hardly a person today with any conception of true free-market principles. The non-capitalist, the poorest among us, persists through a variety of IOU’s, including Federal Reserve notes (dollars), welfare and food stamps, tax breaks and refunds, and etc. The capitalist proliferates via debenture (non-collaterization), long-term invoices, credit schemes, government subsidies, and the like. While true that our lifestyle far exceeds that of any other system (the United States leading the way), we must also accept that much of it has been purchased with non-existent money. These promissory notes (mortgages, student loans, derivative securities, insurances) are now coming due at an alarming rate, and there is not the wherewithal to pay it back. Thereby, we have come to the point of either bankruptcy, slavery, or some type of war. The first option makes the most sense but thereafter subjects us to hard-asset capitalism, that is, very little credit and therefore very little future expansion. Not many are willing to consider this pain. The second option implies that we pay only interest for a very long time, continuing meanwhile to accumulate more debt, which, without a future bankruptcy or war, makes as far as the eye can see every current and future citizen, by way of higher taxes and fewer service, responsible for the excesses. The third option is not really an option, but a distraction. It purportedly eliminates the debt without any financial or economic constraint. In actuality, such debt is merely forestalled until the aggression is complete and the chips are recounted at the end.

Those who have led the charge to this precipice are, of course, the progressives, the Fabian Socialists. Still using Marxist economics, they nevertheless have employed for those 100 years erosive rather than explosive methods. The progressive income tax, for example, is meant to strip wealth from the rich for redistribution to the poor. But even here, the more powerful oligarchies have been able to garner the lion’s share of that thievery, so that the so-called compassion for the poor has been waylaid. Thus, we see that anti-corporatism is in fact a backlash by communists who failed to receive their stolen goods! The Occupy protests, besides being a message that private property does not truly exist (as discussed in previous Synopses), facilitates this “anguish” against those crony capitalists. When Occupy chants “Eat the rich!” they are lamenting their own empty hands. We do not pity the Occupiers because they have no moral high ground. They are merely leeches without blood, that sanguinity having already been pumped to a variety of recipients at the federal intravenous trough.

The corrosiveness of progressivism, having educated our children to hate money but love sin, having corrupted the media and entertainment industries to laud sympathy but eschew hard-nosed practicality, leads to the types of attitudes found on the street today. It is a deliberate agenda to create the feeding frenzy. It is coveting success, breeding hatred for those who have any air of betterment. Naturally, this is not 100% pervasive, but the division has become almost even-sided, and the world is ready to explode in that class warfare which Marx 170 years ago predicted.

We continue this week studying Marxist economics, so essential to understanding today’s economic and financial crises, and the language of the players in it.

Marx’s Wage-Labour and Capital:

By What is the Price of a Commodity Determined?

“By the competition between buyers and sellers, by the relation of the demand to the supply, of the call to the offer. The competition by which the price of a commodity is determined is threefold.”

“The same commodity is offered for sale by various sellers. Whoever sells commodities of the same quality most cheaply, is sure to drive the other sellers from the field and to secure the greatest market for himself. The sellers therefore fight among themselves for the sales, for the market. Each one of them wishes to sell, and to sell as much as possible, and if possible to sell alone, to the exclusion of all other sellers. Each one sells cheaper than the other. Thus there takes place a competition among the sellers which forces down the price of the commodities offered by them.”

An oversimplification, Marx here ignores the fact that successful and profitable niche markets are built around better quality merchandise, unusual and underground merchandise, better customer service (including reliability, speed, and honesty), and more. He assumes that all sellers offer product from the same or similar manufacturer. The variety inherent to capitalism is missing from his paradigm.

“But there is also a competition among the buyers; this upon its side causes the price of the proffered commodities to rise.”

Again, Marx proposes that buyers cannot choose to pay more for those reasons mentioned in the previous paragraph, and therefore his reasoning is too simplistic to even analyze properly.

“Finally, there is competition between the buyers and the sellers: these wish to purchase as cheaply as possible, those to sell as dearly as possible. The result of this competition between buyers and sellers will depend upon the relations between the two above-mentioned camps of competitors – i.e., upon whether the competition in the army of sellers is stronger. Industry leads two great armies into the field against each other, and each of these again is engaged in a battle among its own troops in its own ranks. The army among whose troops there is less fighting, carries off the victory over the opposing host.”

The description is apt where the market is limited, but more so it concerns a true commodity market, such as cotton, following such:

“Let us suppose that there are 100 bales of cotton in the market and at the same time purchasers for 1,000 bales of cotton. In this case, the demand is 10 times greater than the supply. Competition among the buyers, then, will be very strong; each of them tries to get hold of one bale, if possible, of the whole 100 bales. This example is no arbitrary supposition. In the history of commerce we have experienced periods of scarcity of cotton, when some capitalists united together and sought to buy up not 100 bales, but the whole cotton supply of the world. In the given case, then, one buyer seeks to drive the others from the field by offering a relatively higher price for the bales of cotton. The cotton sellers, who perceive the troops of the enemy in the most violent contention among themselves, and who therefore are fully assured of the sale of their whole 100 bales, will beware of pulling one another's hair in order to force down the price of cotton at the very moment in which their opponents race with one another to screw it up high. So, all of a sudden, peace reigns in the army of sellers. They stand opposed to the buyers like one man, fold their arms in philosophic contentment and their claims would find no limit did not the offers of even the most importunate of buyers have a very definite limit.”

Opposition to private property starts immediately, beginning with a straw man argument that sellers who withhold commodities do so as a form of extortion, even against society. That cotton scarcity causes an inflation in the price of clothing has nothing to do with it, for that can happen also by natural causes (weather, infestation). It is the supposition that free trade is evil which furtively begins Marx’s dissertation.

“If, then, the supply of a commodity is less than the demand for it, competition among the sellers is very slight, or there may be none at all among them. In the same proportion in which this competition decreases, the competition among the buyers increases. Result: a more or less considerable rise in the prices of commodities.”

The truth of market dynamics is no mystery. However, Marx fails to consider the circumstances of sellers. What if, for example, one seller is more desperate for money than another? Answer: his price comes down. Competition is thus also determined by human nature and foibles, not only by simple supply and demand.

“It is well known that the opposite case, with the opposite result, happens more frequently. Great excess of supply over demand; desperate competition among the sellers, and a lack of buyers; forced sales of commodities at ridiculously low prices.”

While Marx diffuses his argument concerning rising commodity prices, the reason for falling prices is more accurate, though the circumstances appear similar. The inherent risk in selling is less manageable, being subject to those unforeseen circumstances which can make panic selling. By contrast, buying connotes an ability to wait, and therefore panic buying is much rarer than panic selling.

“But what is a rise, and what a fall of prices? What is a high and what a low price? A grain of sand is high when examined through a microscope, and a tower is low when compared with a mountain. And if the price is determined by the relation of supply and demand, by what is the relation of supply and demand determined?”

“Let us turn to the first worthy citizen we meet. He will not hesitate one moment, but, like Alexander the Great, will cut this metaphysical knot with his multiplication table. He will say to us: "If the production of the commodities which I sell has cost me 100 pounds, and out of the sale of these goods I make 110 pounds – within the year, you understand – that's an honest, sound, reasonable profit. But if in the exchange I receive 120 or 130 pounds, that's a higher profit; and if I should get as much as 200 pounds, that would be an extraordinary, and enormous profit." What is it, then, that serves this citizen as the standard of his profit? The cost of the production of his commodities. If in exchange for these goods he receives a quantity of other goods whose production has cost less, he has lost. If he receives in exchange for his goods a quantity of other goods whose production has cost more, he has gained. And he reckons the falling or rising of the profit according to the degree at which the exchange value of his goods stands, whether above or below his zero – the cost of production.”

The profit of the citizen above is his wage, after all, for the capitalist employer indeed makes his living through labor and production (or service). Profit being thus the same as payday, the concerns of the capitalist citizen are the same as that of the laborer, that is, food, shelter, and the other needs and desires of living. If profit comes in at an expected rate, projected to cover all costs of production plus living expenses (at whichever level one can attain), there is cause to be cheerful. Expectations have been met, and the business concern is a success. If profit exceeds expectations, it is windfall, and may be used to capitalize further business (expansion) or expended in the economy (consumerism).

Marx describes the nature of comparative value. Is there a value beyond the cost of production? Naturally. It is that which the capitalist uses himself to live. Marxism sees this as unnecessary, the capitalist being merely a parasite. The purported solution, central government, does not however solve this problem, for those bureaucrats who would control and run such centralization must themselves be fed and housed. But if the argument is that the elimination of the capitalist creates a more even wage for all, this does not take account for the authority necessary to enforce such laws of sameness, for indeed it must be a law! Marx himself dictates it is human nature which causes marketplaces and capitalism. Therefore, human nature must be subjugated by whatever means necessary for the continued “common good.” Rather then the cruelty of individualist capitalist markets, we shall have one market ruled by the all-seeing eye. It is a choice between levels of authoritarianism and coercion.

“We have seen how the changing relation of supply and demand causes now a rise, now a fall of prices; now high, now low prices. If the price of a commodity rises considerably owing to a failing supply or a disproportionately growing demand, then the price of some other commodity must have fallen in proportion; for of course the price of a commodity only expresses in money the proportion in which other commodities will be given in exchange for it.”

This applies only in ideal circumstances. Marketplaces react to many stimuli, the secondary market especially being subject to rumors.

“If, for example, the price of a yard of silk rises from two to three shillings, the price of silver has fallen in relation to the silk, and in the same way the prices of all other commodities whose prices have remained stationary have fallen in relation to the price of silk.”

This is an incorrect vision of commodity prices. It expresses price only in sameness of currency, and therefore of limited market. The international markets have always fluctuated according to different measures, more so in the computer age. Furthermore, the expression of relative price intimates some deficiency in the marketplace which cannot account for momentary shifts. For example, rising silk prices cause more demand which eventually brings down the price of silk.

“A large quantity of them must be given in exchange in order to obtain the same amount of silk. Now, what will be the consequence of a rise in the price of a particular commodity? A mass of capital will be thrown into the prosperous branch of industry, and this immigration of capital into the provinces of the favored industry will continue until it yields no more than the customary profits, or, rather until the price of its products, owning to overproduction, sinks below the cost of production.”

Marx errs. Falling commodity prices are not a consequence of market blunders but market accuracy. Those who buy silk first, at the higher price, do so from necessity or desire. Those who buy silk later, at the lower prices, benefit from those who first bought, bringing more product to market. The “overproduction” of which Marx speaks is glut, that is, plenty, indicating a strong economy, not weak business minds. It should be understood that those who overproduce, taking in low prices later, have already profited earlier from the higher prices. It is a natural leveling of incomes. But if the argument is that the laborer loses employment in times of glut, this cannot be rectified without the mass enslavement (full employment) of the citizenry under socialism. Not everyone benefits under capitalism, but nobody benefits under communism.

“Conversely: if the price of a commodity falls below its cost of production, then capital will be withdrawn from the production of this commodity. Except in the case of a branch of industry which has become obsolete and is therefore doomed to disappear, the production of such a commodity (that is, its supply), will, owning to this flight of capital, continue to decrease until it corresponds to the demand, and the price of the commodity rises again to the level of its cost of production; or, rather, until the supply has fallen below the demand and its price has risen above its cost of production, for the current price of a commodity is always either above or below its cost of production.”

The inefficiency of the market is perceived well. This inefficiency is the mechanic by which Marx makes his eternal grievance, that the laborer under capitalism is always at the whim of commodity price deviation, and therefore wage insecurity. This creates a Victim and an Oppressor. Communism is offered as the Savior.

There are no other economic systems but capitalism and communism. Either money flows by individual choice, both in capitalization of business, and consumerism of spending, or else it flows by mandate. The choice devolves to freedom or authoritarianism. All other systems (“third way,” et al) are merely compromises or syntheses of these two, the result being only some admixture which contains one of more component than another. This, however, is also authoritarianism, for it relies upon an elitism which supposes to create the proper percentages for an apt and correct solution, as if marketplaces may be designed in laboratories. It is central control.

“We see how capital continually emigrates out of the province of one industry and immigrates into that of another. The high price produces an excessive immigration, and the low price an excessive emigration.”

“We could show, from another point of view, how not only the supply, but also the demand, is determined by the cost of production. But this would lead us too far away from our subject.”

This is a cop-out. Cost of production does not determine demand except if it exceeds expectation. Demand, on the other hand, determines production.

“We have just seen how the fluctuation of supply and demand always bring the price of a commodity back to its cost of production. The actual price of a commodity, indeed, stands always above or below the cost of production; but the rise and fall reciprocally balance each other, so that, within a certain period of time, if the ebbs and flows of the industry are reckoned up together, the commodities will be exchanged for one another in accordance with their cost of production. Their price is thus determined by their cost of production.”

This is not exactly correct. Price is determined by cumulative cost of production, not to mention the terms of demand.

“The determination of price by the cost of production is not to be understood in the sense of the bourgeois economists. The economists say that the average price of commodities equals the cost of production: that is the law. The anarchic movement, in which the rise is compensated for by a fall and the fall by a rise, they regard as an accident. We might just as well consider the fluctuations as the law, and the determination of the price by cost of production as an accident – as is, in fact, done by certain other economists. But it is precisely these fluctuations which, viewed more closely, carry the most frightful devastation in their train, and, like an earthquake, cause bourgeois society to shake to its very foundations – it is precisely these fluctuations that force the price to conform to the cost of production. In the totality of this disorderly movement is to be found its order. In the total course of this industrial anarchy, in this circular movement, competition balances, as it were, the one extravagance by the other.”

Commodity price fluctuations, being a natural consequence of price itself, consider the marketplace. Marx’s contention, that natural consequence equals “anarchy,” brings to bear the concepts of price fixing and centralization. Rather than permitting the market to stabilize itself, the market will be stabilized. This causes well-known distortions, either in the market or external to it. Fixed prices, for example, retard competitive nature, and therefore the quality of merchandise is dependent upon personal craftsmanship rather than the demands of the consumer. This is the beginning of laziness, poor work ethic, shoddy workmanship, and all the other hallmarks of collectivist society, known from time immemorial.

“We thus see that the price of a commodity is indeed determined by its cost of production, but in such a manner that the periods in which the price of these commodities rises above the costs of production are balanced by the periods in which it sinks below the cost of production, and vice versa. Of course this does not hold good for a single given product of an industry, but only for that branch of industry. So also it does not hold good for an individual manufacturer, but only for the whole class of manufacturers.”

Marx builds upon his error to systemic proportions, as if the excesses or deficiencies of one market must have inexorable pull upon all other markets. In actuality, Marx describes centralization, wherein a small error must by bureaucracy and stringency be magnified until entire frameworks are corrupted and fall. By contrast, capitalism has the flexibility and individual creativity necessary to not only self-correct but also protect against external forces. This is of course not foolproof, human nature and foibles being what they are; but confidence in markets rises on projected growth, not on stable prices.

Only authoritarians desire to never see growth, the ups and downs of reality being too much for them.

“The determination of price by cost of production is tantamount to the determination of price by the labor-time requisite to the production of a commodity, for the cost of production consists, first of raw materials and wear and tear of tools, etc., i.e., of industrial products whose production has cost a certain number of work-days, which therefore represent a certain amount of labor-time, and, secondly, of direct labor, which is also measured by its duration.”

Making the quick transition to his desired principle, Marx finds himself nevertheless surrounded by error. Primarily, labor cannot be quantified in the same manner as other commodities, except to the degree that quality control is possible. Whereas cotton may be sifted visually for a certain standard, labor value is in the eye of the beholder. In one industry, a laborer (whatever the job title) could be in high demand, his skill or talent rare. Or, it could be that labor in general is scarce, employment being high. Or, it could be that certain individuals are worth more than others for their reliability or positive other character traits.

It is worthwhile remembering that business runs with people, who have their own individual natures, needs and desires. This is the true marketplace. Marx’s counter-offer, to limit persons of their individuality, is authoritarianism.