Economics 436, Spring 2016
Marxian Economic Theory
Paul Zarembka
Introduction
• We will be demonstrating that capitalism is a
system that exploits workers
• We will provide a couple of examples of famous
socialists you probably don’t realize
• Capitalism is also a system which endangers life
• We will concentrate on theory (as do most
economic courses) but will also offer empirical
evidence
• While Marx is obviously a talented human being,
still we will indicate just a bit of it to ‘humanize’
the person
Introduction to theory
• Consider the meaning of “continents of
knowledge”
• Consider levels of abstraction in social theory,
including economic, political and ideological
instances
• Contrast subjective versus objective
• Contrast science versus humanism
• Importance for human life of production
Major concepts within Production
• Means of production
• Social relations of production
• Productive forces
• Classes
• Class struggle
Concept: Mode of Production
• Throughout this semester we will need to introduce
scientific concepts, similar to ‘gravity’ being a scientific
concept.
• The production and reproduction of human life is basic to
our understanding. However, how it is undertaken changes
over time; there is no rule which tells us how many
historical divisions to describe.
• We refer to these different manners of production and
reproduction of human life as “modes of production”.
• Each “mode” includes means of production, social relations
of production (classes), and productive forces. It will also
include politics and ideology because we are not merely
focusing on the economy. Instead, the economy is basic.
“Theses on Feuerbach”
• Thesis I: (see text)
• Thesis II: The question whether objective truth
can be attributed to human thinking is not a
question of theory but is a practical question.
• Thesis III: The materialist doctrine that men are
products of circumstances and upbringing, and
that, therefore, changed men are products of
changed circumstances and changed upbringing,
forgets that it is men who change circumstances
and that the educator must himself be educated.
• Thesis XI: Philosophers have hitherto only
interpreted the world in various ways; the point is
to change it.
“Communist Manifesto”
• Before we move into the theory of the capitalist
mode of production, we consider one of the most
famous pamphlets of all time.
• Actually, a person is not well-educated if she or
he is in ignorance of this 1848 work by Marx and
Engels.
• We will focus attention upon Section I and then
the end of Section II which represents a platform
for action at that time, some aspects of which
may surprise you.
Some modes of production
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“Primitive” communist mode of production
Slave mode of production
Feudal mode of production
Capitalist mode of production
“Advanced” communist mode of production
(this is not the same as “socialism”)
“Method of Political Economy”
• This material is from notebooks that Marx
wrote in 1857-58 as he begins to organize his
life’s work. I focus upon selected passages
from pp. 236-237, 241, 243, and 244 in the
Tucker book.
Marx’s “Value, Price and Profit”
• “Value, Price and Profit, is an introduction to
his theoretical work that Marx presented in
English in 1865, two year’s before Volume 1 of
Capital. It is a very good starting point to
understand Marx and you should read it
carefully. It is linked on-line.
“Primitive” Communist Mode of
Production
• Who controls means of production?
• Maybe up to 3500 B.C. in S.E. Asia and 1500
B.C. in the Americas
• Marshall Sahlins, Stone Age Economics: wants
are scarce, means plentiful (reverse of
Economics 181/182)
• Development of productive forces?
Slave Mode of Production
• Basic class relation: slave/citizens
• Who controls what?
• Citizens separated from production, detest work
and glorify “culture”
• In Mediterranean, transport costs low
• Independent artisans also
• Modern economic categories cannot be
translated back.
• Development of productive forces?
Feudal Mode of Production
• Basic class relation: lord/serf
• Who controls what?
• Serfs work land for subsistence on the manor, in
return for offering labor, rents or customary dues
• Merchants in towns; some products exchanged
with lords for money
• However, money not basic (important contrast to
capitalism)
• Development of productive forces?
Disintegration of the Feudal Mode and
Rise of Capitalist Mode of Production
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Factors centering upon productive forces
Factors centering upon social relations
Enclosure movement
Introduction of “simple commodity economy”
– various methods used historically
• Separation of handicrafts from agriculture
(cotton textiles)
Basic Concepts
• Labor and labor power
• Value
• Value of labor power (use value and exchange
value of labor power)
• Necessary labor time; variable capital
• Surplus value
• Constant capital
• Rate of surplus value; rate of exploitation
Two Fundamental Concepts
• Production of Absolute Surplus Value (pp. 344-376)
A --------B -------- C
to
A --------B --------------C’
• Production of Relative Surplus Value (pp. 376-419)
A --------B -------- C
to
A -----B’ ---------- C
Outline of Capital, Volume 1
Before our next step, we consider the outline of the full
Volume 1:
• Part I: Commodities and Money (111 pp.)
• Part II: The Transformation of Money into Capital (31 pp.)
• Part III: The Production of Absolute Surplus Value (135 pp.)
• Part IV: The Production of Relative Surplus Value (195 pp.)
• Part V: The Production of Absolute and Relative Surplus
Value (28 pp.)
• Part VI: Wages (29 pp.)
• Part VII: The Accumulation of Capital (134 pp.)
• Part VIII: The So-Called Primitive Accumulation (62 pp.)
Third method for increasing Surplus
Value: Part VII of Capital, “The
Accumulation of Capital”
• Simple Reproduction (Chapter XXIII in Marx,
but not reproduced in Tucker.)
• Conversion of Surplus-Value into Capital
(Chapter XXIV in Marx, but not reproduced in
Tucker.)
• The General Law of Capitalist Accumulation
(Tucker’s p. 419 has *** before Chapter XXV
without mentioning the two prior chapters.)
Marx’s chapter on “General Law of
Capitalist Accumulation”
• 1. The Increased Demand for Labor-Power that Accompanies
Accumulation, the Composition of Capital Remaining the Same
• 2. Relative Diminution of the Variable Part of Capital Simultaneously
with the Progress of Accumulation and of the Concentration that
Accompanies it
• 3. Progressive Production of a Relative Surplus-Population or
Industrial Reserve Army
• 4. Different Forms of the Relative Surplus Population. The General
Law of Capitalist Accumulation
• 5. Illustrations of the General Law of Capitalist Accumulation
Homework as scheduled
See the two-page sheet portraying Marx's schemes of reproduction and a
simplification by Pannekoek. Your assignment is as follows:
1. Show the calculation on the second page for the third step in the process,
including showing that sales from Department I match sales from
Department II.
2. Provide the representation of what the fourth step is numerically, again
indicating how the sales between the departments match.
3. What is the rate of increase in the numbers of laborers throughout each of
these four steps?
4. Go to A Short History of US Capitalist at www.newhistory.org, click on
download, go to Chapter 8, Table 5. First, calculate the compound growth
rate between 1870 and 1920 for the number of wage-workers (you will
have to decide for yourself whether to include the 'clerical' category, and
so report in your paper).
5. (Now the most timing-consuming part of the project:) Through library
research, extend that table from 1920 to 1935, then to 1950, and finally to
2000. Carefully, cite your sources.
6. From the data in '5', describe what you learn about accumulation of capital
in the U.S. during this period.
The Problem of “Realization” and
J.M. Keynes’s Theory
• “Realization” is a new theortical concept in our course.
So far, we have only discussed the production of
surplus value (paying workers less in the time required
to produce the goods they consume than the hours
they must work). However, our theory does not end
there because the capitalists must SELL what they
direct workers to produce. To the extent that they fail
to SELL or undersell they have not realized fully surplus
value.
• This problem is connected to Keynes’ theory which we
discuss in class and relate to Marx’s theory.
Keynes’ Theory
• Rarely are students asked to read Keynes; rather, a
reinterpretation is offered. In this course we will not read
Keynes, either, but will offer an interpretation intended to
demonstrate what is wrong with (neo)-classical economic
theory.
• We will show how Keynes basically ‘started over’, by asking
a different question. His work helps us understand the
vulnerabilities of a capitalist economy that can lead to
Depression.
• We will demonstrate the crucial role of expectations for
Keynes and his critique of Say’s Law. We will show how
capitalists drive Depression, not workers. We will help you
understand how macroeconomics arose out of Keynes’
work.
Unproductive Labor
• Unproductive labor in Marx followed upon discussion by
Adam Smith. Smith, opposing feudal lords, did not consider
household servants (for example) as productive. But Smith
did not have the concept of surplus value.
• Marx says that wage-laborers (those who sell their labor
power to capitalists) are not always productive of value and
thus surplus value. We need to consider this carefully.
• The implication is the surplus value may be used for
accumulation of capital and luxury consumption of
capitalists as we have already discussed, but may also be
used for hiring workers to do something else. We will break
these possibilities down into those without state
intervention and those with.
• This elaboration can be used to elaborate on Keynes and be
used to explain a major distinction between the time Marx
was writing and the world of the 20th and 21th centuries.
Unproductive Labor and the 20th
Century
• Marx did not focus on unproductive labor for
the 19th century, but we will consider the
imperialists fighting for colonies, then
• World War I
• Depression
• World War II
• Cold War era, continuation of high
unproductive labor, with rising s/v (data from
Edward Wolff, as handed out in class)
Rate of Profit and its Tendency over
Time
• Rate of profit π in terms of labor time = s/c
• π = s/c, although in Marx himself it is s/(c+v) – we will
discuss why v is probably not important
• Now, s/c = s/v ÷ c/v = s/v ÷ [ c/(v+s) × (v+s)/v ] where
we recall that c/v is the organic composition of capital
• Let the material composition of capital be k = c/(v+s)
which is a more accurate description of technology
• Therefore, π = s/c = s/v ÷ [ k × (1 + s/v) ]
• If s/v the rate of exploitation is constant, π falls if k
rises. But some evidence suggests that k does not rise
but has been rather stable – see course link.
The Transformation Problem
• This is a technical problem that Marx
recognized in determining prices of
commodities in the market using labor times
required to produce them.
• We study both transfer of values across
industries and across countries, using
numerical examples that are handed out.
Interest-bearing Capital and Merchant
Capital
• If C means commodity, M means money, and
P means production, then we need to
understand:
• Simple Commodity Circulation: C – M – C
• Money as Capital: M – C … P … C’ – M’
• Interest-bearing Capital: M – M’
Commodities
• We now turn to the beginning of Marx’s
Capital, consider several passages, and place
them in the context.
• We also study a chapter in a book by Garry
Leech to understand better how
commoditization occurs in regard to the
pharmaceutical industry, focusing upon Africa.
Primitive Accumulation
• We will discuss so-called “primitive
accumulation” in class, citing Marx’s
conception.
• In addition, you are expected to familiarize
yourself with my text material on primitive
accumulation that is linked, as well as
Perelman’s material that is also linked. It is
somewhat advanced for this course but
nevertheless, you need exposure to it.
Marxism and Politics
• As we approach the end of this course, we turn to
the political dimension of Marx’s thought.
Basically, marxism argues that the state serves
the interests of the dominant class, and in
capitalist society that would of course be the
capitalist class.
• For example, does evidence show that 9-11 was
done by Al Qaeda or instead by internal U.S.
actors?
• For this course, I ask you to read some of Marx’s
work on the Civil War in the U.S. so that you are
exposed to how Marx himself understood why it
happened and that he predicted the outcome
before it occurred.
Marxism and Politics, cont.
• I also ask you to read Marx’s study of the famous Paris
Commune of 1871 to understand what the workers
actually DID when the took power. And also to
understand why they could not hold onto power.
• Marx did NOT have a blueprint for what a socialist
society would look like, but rather argued that this is
for the workers to decide (not any “leader”: recall
Eugene Debs in the course video: ‘if I could lead you
out of the wilderness, I could also lead you back in!’ In
other words, don’t depend upon leaders but upon
yourselves.)
• You will also read material on feminist economics.