Capitulo V. Karl Marx.

Sergio's Realization and Marx's Influence

Sergio's Work Environment

• Sergio works in a woodworking factory with 10 other employees, producing 5,000 chairs monthly due to machines purchased by Juan Martín.

• He calculates that his basic needs can be met by the value of 150 chairs, leading him to consider a salary equivalent to this amount.

• Sergio realizes that if they could operate independently from their employer, each worker could produce only 150 chairs, fulfilling their needs while working just two hours daily.

Introduction to Karl Marx

• Karl Marx, born in 1818 in Trier, Germany, is recognized as a significant and controversial intellectual who studied law and philosophy.

• His political engagement began early; he sought to understand capitalism and became involved with workers' organizations around 1844.

• In 1848, alongside Friedrich Engels, he published "The Communist Manifesto," one of history's most influential texts.

Marx’s Economic Theories

Capitalism and Its Critique

• After moving to London post-deportation in 1849, Marx focused on studying classical economics while living in poverty.

• He published "Das Kapital" in 1867, analyzing how goods are produced and distributed within society.

Industrial Revolution Insights

• The Industrial Revolution significantly increased wealth for Britain but left the lower classes impoverished with no labor protections or reasonable working conditions.

• Workers faced long hours without breaks; child labor was common amidst poor hygiene standards.

Emergence of Class Consciousness

• As industrialization progressed, European workers began recognizing their exploitation and organized into unions for better wages and working conditions.

• The first International Workingmen's Association was established in London in 1864 as a response to these issues.

Marx vs. Classical Economists

Market Dynamics

• Unlike classical economists like Smith and Ricardo who viewed the market as an optimal social organization for production distribution, Marx saw it as part of a capitalist order needing historical context for understanding its origins and potential end.

Labor Value Theory

• Decisions regarding production are driven not by authority figures but by entrepreneurs seeking profit through hiring workers who often have no choice but to sell their labor for survival.

• Marx aimed not just at critiquing economics but at providing tools for worker liberation from systemic exploitation limiting personal development.

Commodity Analysis

• While agreeing that the value of goods depends on labor input (a view held by classical thinkers), Marx emphasized that many goods were historically not produced for market exchange.

Understanding the Role of Commodities and Labor in Capitalism

The Nature of Commodities

• Useful items have existed across all societies, indicating a universal need for goods.

• A commodity is defined as an item with both use value (utility) and exchange value (market price), exemplified by household appliances, furniture, and cosmetics.

• All these examples are classified as commodities due to their production for sale.

The Function of Money

• Money serves as a universal equivalent that translates the exchange value of all commodities, allowing for the preservation and accumulation of value over time.

• Not all useful objects are commodities; some are created to meet personal needs rather than for sale, such as homemade birthday cakes or packed lunches.

Exchange Dynamics

• Different commodities can be exchanged through money based on their distinct utility; for instance, two pens worth 15 pesos each can be traded for a t-shirt costing 30 pesos.

• The desire to exchange arises from differing use values; identical items cannot be exchanged since they do not fulfill diverse needs.

Labor Theory of Value

• Marx posits that there exists an underlying substance that equalizes different commodities: human labor. This labor manifests in various forms but is abstracted during exchanges.

• Abstract human labor represents the expenditure of physical and mental effort in production. When two use values are equated as commodities, their unique material qualities are overlooked.

Production Costs and Capitalist Exploitation

• The value of a commodity is determined by the amount of socially necessary labor time required for its production, influenced by average industry conditions rather than individual efforts.

• If it takes longer than average to produce an item (e.g., a pen), its market price remains unchanged while production costs increase due to higher wages paid.

Profit Motive in Capitalism

• Capitalists aim to generate profit by selling products at prices exceeding production costs. This leads to inherent exploitation within capitalist systems where workers receive less than the full value they create.

• Marx argues that regardless of individual capitalists' intentions or moral character, they exploit workers by compensating them only a fraction of their output's worth.

Class Division and Market Dynamics

• In a classless economy where everyone owns their means of production, workers would retain full product benefits. For example, trades between artisans would reflect equal labor contributions.

• Under capitalism, however, capitalists own production means while workers sell their labor power for survival. Independent craftsmen face challenges against larger enterprises due to rising operational costs.

Capital Accumulation Strategies

• The bourgeoisie controls capital—money used to generate more wealth—by investing in productive resources like machinery and workforce management aimed at maximizing profits.

Understanding Labor and Capital in Marxist Theory

The Nature of Labor and Value

• Workers possess only their labor power to sell in the market, which is essential for their survival. The capitalist pays a wage that represents the price of this labor power.

• The exchange value of a commodity is determined by the labor required to reproduce it. Thus, the value of labor power equals what a worker needs to sustain themselves and return to work.

• To maintain their strength and support their families, workers' costs include food, clothing, housing, health care, and education. However, Marx argues that labor power is unique as it can create value.

• Unlike machines or robots that merely transfer value based on wear during production, only humans have the capacity to generate new value through their work.

• Employers purchase workers' ability to work for the duration of their shifts in exchange for wages.

Exploitation and Surplus Value

• The total value generated from commodities exceeds the wages paid to workers. This difference represents exploitation known as surplus value (plusvalía), which is appropriated by capitalists.

• According to Marx, surplus value arises from unpaid labor; it reflects how much more value workers create than what they are compensated for.

Production Dynamics

• For instance, a factory produces 5,000 chairs monthly but requires only one worker's effort for this output. Workers could meet their needs with just a few hours of daily work.

• However, contracts allow employers like Juan Martín to require eight-hour shifts from workers—resulting in 3,500 additional chairs sold at profit after paying wages.

Market Uncertainties

• Capitalists earn profits only when they sell produced goods; they focus on market demand rather than societal needs when deciding production levels.

• Entrepreneurs estimate potential sales based on expectations but face uncertainty regarding pricing and demand—leading often to mismatches between supply and demand across various goods.

• When many producers fail to sell excess inventory simultaneously, it leads to crises of realization or overproduction within capitalism.

Crisis Mechanisms

• In response to unsold goods, capitalists adjust expectations by reducing production levels for subsequent years—often resulting in layoffs and decreased investments that trigger economic crises of varying severity.

• Marx posits that these crises are not isolated events followed by recovery; instead, they reveal inherent contradictions within capitalist production systems making them inevitable occurrences.

Class Struggle as Historical Driver

• Marx critically analyzes capitalism's productive capabilities alongside its growing inequalities. He emphasizes ongoing conflicts between antagonistic groups as central themes in his analysis.

• Contrary to Adam Smith’s view of social harmony being natural within capitalism, Marx asserts that domination leads inevitably to conflict between ruling classes seeking control and subjugated classes striving for liberation—a dynamic he sees as history's driving force.

Future Implications

• In capitalist societies where class struggle prevails, workers may ultimately become agents leading towards capitalism's demise. While interpretations vary on how this will unfold historically post-Marx’s theories remain influential in economic studies moving forward.

• Rather than predicting future outcomes directly related to capitalism’s end state or natural order—as classical theorists suggested—Marx focused on identifying systemic contradictions shaping economic realities henceforth influencing economic discourse significantly thereafter.

Case Study: Market Response

• A practical example illustrates how Juan Martín anticipated selling 5,000 chairs but faced an effective demand for 6,000 chairs instead.

• As a result of increased demand beyond initial estimates he raised prices while planning further production increases leading into next periods thus reflecting broader industry trends impacting employment conditions favorably towards organized worker movements seeking better compensation.