MARXIST INTERNET ARCHIVE  |  PRINCIPLES OF MARXISM-LENINISM | Bill Bland

PRINCIPLES OF MARXISM-LENINISM

A STUDY COURSE

CLASS TWO : HOW CAPITALISM WORKS (Part One)

By W.B. Bland.

1. WHAT IS A COMMODITY?

Something produced for exchange, not for the personal use of the producer.
A peasant who grows vegetables for his family is not engaged in commodity production, but in production for use. But if he grows them in order to exchange them with the landlord of the local inn for ale, he is engaged in production for exchange, in commodity production.

2. WHAT IS SIMPLE COMMODITY PRODUCTION?
The production of commodities by producers who own their own means of production, like that carried on by artisans under the feudal system.

3. WHAT IS CAPITALIST COMMODITY PRODUCTION?
The production of commodities by working class producers in a capitalist society, that is, by producers who do not own their means of production and so are compelled, in order to live, to seek employment with capitalists who do own means of production.

4. WHAT IS A MARKET?
 

An area where those who wish to dispose of a commodity and those who wish to acquire it are in contact. Thus, we may speak of a local livestock market or a world oil market.
A market where there are a number of separate individuals or firms competing to dispose of a commodity and a number of individuals or firms competing to acquire it is called a competitive market.

5. WHAT IS THE RATE OF EXCHANGE OF A COMMODITY?

The number of commodities of other kinds for which that commodity can be exchanged in a particular market at a particular time. If a cow can be exchanged in a town's cattle market on a particuar day for two pigs, the rate of exchange of a cow is equal to two pigs, while the rate of exchange of a pig is one- half of a cow.
6. WHAT IS THE VALUE OF A COMMODITY?.

Clearly, it is not necessarily equal to its rate of exchange in a particular market, for in the last example we may speak of a cow being 'worth more' or 'worth less' than its actual exchange value.

At the basis of the exchange rate between two commodities lies the relative quantity of work required to produce them. In fact, the value of a commodity is the necessary labour time required to produce it. So, if it takes 4,000 times more hours to produce a car than to produce a briar pipe, the value of a car is 4,000 times that of the pipe.

7. WHAT DETERMINES THE RATE OF EXCHANGE OF A COMMODITY IN A COMPETITIVE MARKET?

Supply and demand, which causes the rate of exchange to fluctuate above or below its value.

If, for example, there is a shortage of sugar in a particular market, those who wish to obtain it will tend to offer more than its value in order to obtain it. On the other hand, if there is a glut of sugar in a particular market, those who wish to dispose of it will tend to offer it at less than its value in order not to have it left on their hands.

However, if the rate of exchange of a commodity is above its value as a result of shortage, the production of sugar will yield exceptionally high returns, Consequently, more people will go in for producing it, and the production of sugar will rise until its rate of exchange goes down to its value. The reverse process operates if the rate of exchange of sugar is below its value as a result of supply exceeding 'demand'; the production of sugar then yields exceptionally low returns, so that the production of sugar will decrease until its rate of exchange rises to its value.

Thus, in each competitive market there is a tendency for the rate of exchange of each commodity to correspond, in the long run, to its value.

8. WHAT IS BARTER?

The direct exchange of one commodity for another, e.g., wheat for bricks.

9. WHAT IS MONEY?

A commodity (or token of a commodity, such as a banknote, which is the token for a certain quantity of gold) which is generally acceptable within a particular community as a medium of exchange.

The introduction of a monetary system removes many of the difficulties inherent in a barter system. Under the latter, if a weaver wishes to obtain a pair of shoes, he must search for a shoemaker who wants cloth. But when money is in social use, he may sell his cloth to anyone for money and use this to buy shoes from any shoemaker.

10. WHAT IS PRICE?

The rate of exchange of a commodity expressed in terms of money.

11. WHY DO PRECIOUS METALS SUCH AS GOLD AND SILVER COME INTO USE AS MONEY?

For convenience of use and transport. Being rare, their production involves a very large amount of labour time, so that a small quantity of them embodies a very large value.

12. WHAT IS LABOUR POWER?

The capacity of a worker to work for a certain period of time.
The worker, owning no means of production of his own, is compelled in order to live to try to sell his labour power to a capitalist. Thus, in a capitalist society, labour power is a commodity.

13. WHAT DETERMINES THE VALUE OF LABOUR POWER?

As in the case of other commodities, the amount of socially necessary labour time involved in its production, that is, the value of the commodities required to produce, maintain and reproduce it.

The value of labour power is not, however, that of the bare subsistence of the worker and his dependents (who form the next generation of workers) but depends on such additional factors as the subsistence necessary to train a skilled worker, the degree of 'civilisation' of the country concerned, and so on.

14. WHAT ARE WAGES?

The price of labour power.
In a competitive market, the price of labour power, like that of other commodities, may fluctuate above or below its value according to supply and demand, but in the long run its price tends to correspond to its value.

15. WHAT IS SURPLUS VALUE?

The new value created in the course of production by a worker's labour over and above the value of his labour power. If a worker receiving 100 a week in wages were to create only 100 a week in value, his employer would obtain no benefit from employing him and would cease to do so.

An employer will employ a worker only if he produces in a week an amount of new value which exceeds what is paid to him in wages. The difference is the surplus value -- value which is created by the worker but appropriated by his employer. If a worker creates 200 of new value in a week but is paid 100 in wages, his employer has obtained 100 in surplus value from that worker. So, if he employs 1,000 such workers, he obtains a total of 100,000 of surplus value in a week.

This is the mechanism by which the capitalist class exploits the working class. Clearly, exploitation under capitalism has a more concealed character than under slavery or feudalism.

16. WHAT IS CAPITAL?

All that is owned or hired by capitalists in a capitalist society -- land, buildings, machinery, raw materials, labour power -- enabling them to acquire surplus value, that is, enabling them to exploit workers.
The money expended by capitalists for this purpose -- a process known as investment -- is also called capital.

17. WHAT IS CONSTANT CAPITAL?

All capital except that used for the buying of labour power.

Land, buildings, machinery and raw materials do not themselves create new value, but are merely the instruments with which human labour power creates new value. Since the capital expended on these items does not change in value in the course of capitalist production, it is called constant capital.

18. WHAT IS VARIABLE CAPITAL?

Capital expended on the purchase of labour power.

Since the new value created in the course of capitalist production is created entirely by the worker's labour power, the capital expended on this item may be regarded as having changed -- increased -- in value in the course of capitalist production. It is, therefore, called variable capital.

19. WHAT ARE RENT, INTEREST AND PROFIT?

The portions of surplus value which are appropriated by different sections of the exploiting class (or by different exploiting classes) in a capitalist society.

Rent may be paid by the employer (the entrepreneur) to a landlord for the hire of land and/or buildings where his enterprise is carried on.

Interest may be paid by the entrepreneur to a financier or bank for the hire of money capital he requires to carry on his enterprise.

Profit is that portion of the surplus value which the entrepreneur retains for himself after paying any rent or interest.

Rent, interest and profit, being portions of the surplus value produced in the course of capitalist production, all have their source in the exploitation of the workers. An entrepreneur who owns his own land, buildings and money capital retains, of course, all three portions of the surplus value for himself.

20. WHAT IS COMMERCIAL PROFIT?

The profit obtained by a commercial capitalist, that is, one engaged in the distribution (i.e., selling) of commodities.

21. WHAT IS THE SOURCE OF COMMERCIAL PROFIT?

Value is created only by produtive labour, and surplus value is created only by labour employed in capitalist production. No value is created in the process of distribution.

The source of commercial profit (as well as the source of the wages of employed distributive workers) lies in the surplus value created by employed production workers. The capitalist engaged in production sells his finished commodities to a capitalist engaged in distribution at a discount, below their value. The capitalist engaged in distribution realises his commercial profit by reselling them at their value.

In other words, the capitalists engaged in production pass to the capitalists engaged in distribution a portion of the surplus value created by their employed production workers in the course of capitalist production.

22. WHAT IS THE MOTIVE OF PRODUCTION UNDER CAPITALISM?

Profit.
Each capitalist firm strives to make for itself the maximum possible amount of profit.

23. CRITICISE THE FOLLOWING ANALYSIS:

'BECAUSE OF THE OPERATION OF THE PRINCIPLE OF SUPPLY AND DEMAND IN A CAPITALIST SOCIETY AS DESCRIBED IN PARAGRAPH 7 ABOVE, THE PROFIT MOTIVE AUTOMATICALLY GEARS PRODUCTION TO DEMAND'.

The 'demand' which is satisfied as a result of the operation of the profit motive is not the needs of the masses of the people. It is what is called 'effective demand', that is, 'demand' measured in terms of the money which consumers are willing and able to spend on the satisfaction of their needs.

If the entire population of a capitalist country were to demonstrate in the streets for bread, there would be no 'effective demand' for bread unless they had the necessary money to offer in the bakers' shops.

Thus, the profit motive gears production approximately to the needs of those people with enough money to express their needs in effective demand. That is why, although there has long been a housing shortage for working people in capitalist Britain, capitalist building firms do not use the resources of the building industry to build houses and flats for working people but, instead, use them to construct such things as office buildings (which may stand empty for years). They do so because the latter course is more profitable, although the social need for it is incomparably smaller.

Only when the profit motive has been abolished and production is consciously planned can it be geared to the real needs of the people.

     CLASS ONE : THE DEVELOPMENT OF SOCIETY

General Definitions.

     CLASS TWO : HOW CAPITALISM WORKS (Part One)

The Commodity; Money; Labour Power...

     CLASS THREE : HOW CAPITALISM WORKS (Part Two)

The accumulation of Capital; Capial and Labour; Imperialism...

     CLASS FOUR : THE STATE AND THE ROAD TO SOCIALISM

The State; Parties; Socialism; fascism...

     CLASS FIVE : THE PARTY OF THE WORKING CLASS

Reformism; Class interests; Revisionism...

     CLASS SIX : THE NATIONAL QUESTION

Nations; Proletarian Internationalism...

     CLASS SEVEN : WAR

Civil wars; just and unjust wars; wars of national liberation...

     CLASS EIGHT : HOW  SOCIALISM  WORKS

What is Socialism; its class character...