Hello comrades. Today we are going to look at the contradictions inherent in capitalism. We will see, using economic logic, why capitalism’s
downfall is inevitable. I am performing this analysis from a Marxist perspective, but you don’t have to be a Marxist or even a leftist to appreciate
what follows. Since this focuses on the problems with capitalism rather than the benefits of communism, I hope even those hostile to the Marxist
project will at least get the message that capitalism is doomed.
For our analysis today, you will need:
1. One open mind
2. A little patience
3. That’s all!
Ready? Let’s get started!
Marx and Engels predicted how capitalism would destroy itself using iron logic. We can see that they were spot-on correct, as capitalism continues to
destroy itself before our very eyes.
But why? Why is capitalism failing now? What makes it a flawed system? To understand, we have to back up and look at a few basic concepts in a fresh
To begin, let’s look at an idea called the labor theory of value
. This was posed first by the economist David Ricardo, who influenced both
Marx and capitalist theorists. The idea is that the price of any good depends on the time needed to make it. A motorbike costs more than a bicycle
because more time and human effort goes into making it.
This idea is important for the way we understand commodities
and their value
. We can exchange any two commodities for each other: for
example, a pile of paperclips can be traded for a new Mercedes-Benz…but it would have to be a big pile indeed. What determines the size of this
pile? Marx wrote: ”The value of one commodity is to the value of another, as the labor time necessary for the production of one is to the
Human labor – the time and effort needed to bring a good to market – is the “secret sauce” that determines the value of things.
This is what modern capitalists want you to forget
, with all their hearts.
Next, let’s look at the concept of the fixed capital
. This is the machinery, equipment, information, know-how, place of business, and other
“tangible” factors that go into making a product and delivering it to market. If we are talking cars, this includes the factory, all the tools,
all the patents and intellectual property that can be bought and sold, the corporate offices where the suits work, and so on. Every business that
produces anything has some fixed capital. When the fixed capital is improved (like upgrading from a horse to a car, or a typewriter to a computer),
businesses get more profit. So they are constantly seeking efficiency through new technological advances and better machines and production
This, of course, puts people out of work. If a robot can build a car faster and cheaper than a human factory worker, guess which one goes and which
The opposite of fixed capital is variable capital
. This is basically a fancy way of saying “the money spent on labor power.” Now, here
comes a very important but subtle point, so pay attention. The price of a product includes both the fixed capital and variable capital: For example,
the price of a car includes the cost of all the raw materials and machinery used, plus the labor power.
PRICE OF GOOD = FIXED CAPITAL + VARIABLE CAPITAL + “SOMETHING EXTRA”
What is the “something extra?” It’s the extra price the capitalist tags on the end to make a profit
. Without profit, a capitalist can’t
survive – capitalists need profits not just to enjoy fancy steak dinners, but also to invest in new machines and technology (new fixed capital) to
keep up with the competition, plus to beat inflation, and for other means. So to make a profit, a capitalist has to get more money by selling his good
than he spends buying it, right? This is the “something extra” that goes on the end of the equation above. But where does it come from? How does a
capitalist make profit?
The capitalist has two choices for extracting this “something extra”: He can get it from the fixed capital, or he can get it from the variable
capital. Actually, as it turns out, he can’t really get it from fixed capital. If a shoe-maker buys a new shoe-making machine, he can pass the price
along in final price of his shoes, but he can’t really do too much else. If he wants to squeeze out profits, he’s going to have to look to the
variable capital part of the equation: in other words, the labor.
Human beings are different from machines or other forms of fixed capital, for lots of reasons. And humans are what capitalism exploits in the quest
for profit: By making humans work more for less, the capitalist is able to get the “something extra,” or surplus value.
This insight, which
continues to be valid today, is Marx’s theory of surplus value.
It shows how the capitalist squeezes the worker for the extra value: by
making him work more for less, by an endless focus on “efficiency” and “productivity,” by reducing the number of workers and making those that
remain do twice as much work, by pitting workers against each other and making them lower the prices at which they work, and so on. In short, profit
comes by exploiting the worker
. Capitalism is the unending process of bosses trying to get more out of workers for less.
workers work more (either faster, harder, or longer) than they originally agreed to be paid for, capitalists extract profit through exploitation.
edit on 19-3-2012 by Leftist because: (no reason given)