A few things that can be learned from Karl Marx
about wealth in capitalism

1. Some peculiar features of the capitalist mode of production that people often have problems with

Many people think that certain peculiar features of the capitalist mode of production are humanly destructive and irrational. Religious leaders, social workers, labor unions, politicians, etc., notice the juxtaposition of poverty and wealth in capitalism. In the USA, we see millions of people who can’t support themselves on their economic resources or find a way to make a living. When we look around the world, there are hundreds of millions of people who can’t earn a livelihood in this economic system. Many go hungry, while others scramble to get by on a dollar a day. It’s no secret: enormous wealth and extreme poverty exist side by side. Even in the world economy’s few successful centers, it is taken for granted that the rich get richer and the ordinary workers are relieved if their real wages don’t continue to decline.

The second absurdity is that the productivity of labor keeps increasing. Twenty-five years ago, it took a lot more people than today to run the same factories. And the decreased number of workers does not produce less, but more than ever before. The development of the productive power of labor is said to be about 5% a year; it doubles every twenty years. And yet the work never decreases. The productive power of work skyrockets and work is never reduced for those who do it; for them, work never becomes more productive. Right next to each other, there are employed people who are so overworked that they suffer from stress and people who are desperate to find work. And yet these two groups can’t split the work among themselves.

The third absurdity is that the economy operates in such a way that, in striving to make money, everyone streamlines until the universal pursuit of growth reaches a breaking point. Not in the sense that a single firm loses revenue because a competitor has become more productive and forces it from the market, but in the sense that it turns out that all the firms, in striving to make more and more money, are make less and less money. The crisis becomes generalized. The economy does the opposite of what everyone wants it to achieve: it stagnates or slides into recession, although everyone is trying to ensure that there is more and more of everything.

Everybody notices these absurdities. You don’t need to read Marx to learn about them. Marx, however, does not join the complaining, but sets out to explain them. He gives an answer to why these peculiar features exist. He’s interested in questions that most people aren’t interested in, such as: what is “money” really? The members of bourgeois society are faced with the problem of having to make money. They don’t care what money is, only how much of it they can get. They want as much money as they can get so that they can buy stuff. Marx is concerned with a different question: what do you actually have in your hand when you have money?

Marx maintains that the above-mentioned absurdities are not because this type of economy “isn’t working” or because of the “bad behavior” of a few members of this society, but are necessary consequences of this type of economy. And that’s why he doesn’t begin his book Capital in the way that bourgeois economists do, with the intentions and motives of the people participating in the economy. It is about something trivial: why does someone go to work? Because they want to earn a livelihood and because they want to live as best as they can. When you think of motives here, everything is very rational. Assuming this, the economic mode is supposed to be predicated on the satisfaction of needs. Marx does not address the motives of people, but the social forms in which they get involved when they pursue their motives. That’s why Capital doesn’t begin with people, but with the commodity. Marx begins by referring to the objectified form of social wealth, and this already tells us what people do. People’s intentions, good or bad, do not matter when they have to deal with commodities; then their purposes have already been set.

2. Use-value and exchange-value: the two qualities of the commodity and what they show

“The wealth of societies in which the capitalist mode of production prevails appears as an ‘immense collection of commodities’; the individual commodity appears as its elementary form. … They constitute the material content of wealth, whatever its social form may be. In the form of society to be considered here they are also the material bearers of … exchange-value.” (Karl Marx, Capital, Vol. I, p. 125-126)

What is Marx telling the reader in this first sentence? The wealth of this society which constitutes its prosperity appears as a collection of commodities. The single element of this wealth is the individual commodity. And what is a commodity? A useful thing. Secondly, a thing with a price at which it exchanges for money. This wealth does not simply consist of being a useful thing that can be used to satisfy a need. If you have cooked your own food, then you have not produced a commodity, but a good meal. In this society, wealth does not come from the useful things which can satisfy needs. The useful thing is something else at the same time: a thing for sale.

From this commonplace observation, Marx draws a conclusion:

“Exchange-value appears first of all as a quantitative relation, the proportion, in which use- values of one kind exchange for use-values of another kind. … x boot-polish, y silk, or z gold, etc. each represent the exchange-value of one quarter of wheat. Therefore x boot-polish, y silk, z gold, etc. must, as exchange-values, be mutually replaceable or of identical magnitude. … [T]he valid exchange-values of a particular commodity express something equal … [They] are therefore equal to a third thing, which in itself is neither one nor the other.” (ibid., p. 126-127)

If boot-polish, silk and gold are exchanged for wheat, or wheat is exchanged for the other three things, and these things are counted as equal in exchange, then these things must have the same substance. They must have a third thing in common which does not correspond to the use-value of the boot-polish or the use-value of the silk. The common third thing is well known to everyone. When people exchange and/or buy, they are aware that they must be careful about how much they get in the exchange. They have the idea that they can make a good exchange or a bad exchange. If this is true, then they also have an idea about a “correct” exchange ratio. What do they think would be the correct exchange? An exchange in which the owner gains nothing and loses nothing. But from the standpoint of use-value, one always gains when one exchanges. One gets what one needs, and one is willing to give something up for it. But if one has the idea of a “correct exchange,” then this does not apply to the use-value; then one thinks of the quantity: how much do I get for my money? The idea of the “correct” exchange refers to the value that one holds in one’s hands. The valid exchange-value of commodities expresses a match which is with neither one nor another commodity, but with a commonality of commodities. Now comes the conclusion that has caused so much surprise:

“If then we disregard the use-value of commodities, only one property remains, that of being products of labour. … All these things now tell us is that human labour-power has been expended to produce them, human labour has been accumulated in them. As crystals of this social substance, which is common to them all, they are values – commodity values.” (ibid., p. 128)

Marx’s famous conclusion about labor has been taken to mean: what else should it be? All the other characteristics of commodities relate to the commodity’s use-value side. The weight, the odor, the solidity, whether one can listen to music with it, whether one can saw a board on it, etc. – in these respects, commodities differ. And it would certainly be absurd to exchange things that are the same. Nobody exchanges a kilo of salt for a kilo of salt. What do commodities have in common when one puts aside everything having to do with their natural qualities? Only that they are products of labor. [1]

Here one might say: this is trivial; of course, material wealth only comes into existence through labor. This is true in all societies. But it’s not that simple. The labor that forms the substance of value, thus the fact that the exchanged things are products of labor, is not the actual labor of individuals:

“ … [T]he labour that forms the substance of value is equal human labor … The total labour- power of society, which is manifested in the values of the world of commodities, counts here as one homogenous mass of human labour-power.” (ibid., p. 129)

The labor which constitutes the substance of value is the socially necessary average labor time. The issue is not whether the labor is fairly rewarded and if one gets more by working more. Marx maintains here that the value of the labor product doesn’t depend at all on the individual labor that has actually been expended. Vice versa, the individual finds out how much socially valid labor has been realized with his individual toil from the price his commodity wins on the market.

Bourgeois economics have argued that goods rarely exchange exactly according to the labor hours incorporated in them. This is supposed to be a criticism of Marx, although Marx clearly says that it is not the real individual labor that forms the substance of value. It’s not as if Marx wanted to calculate the working hours that are measured in prices, only to realize that there is a divergence between the real amount of work and the price. This follows from what Marx has claimed – it does not rebut it! Marx wasn’t interested in calculating prices. He wanted to say something else, and he dealt with these objections in a passage in a letter to Kugelmann. The economists said to Marx: prove your concept of value; prove empirically that working hours is the substance of value and can therefore be used to calculate prices. Marx, however, contended that it is not a matter of having to prove value and its substance:

“The nonsense about the necessity of proving the concept of value arises from complete ignorance both of the subject dealt with and of the method of science. Every child knows a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs required different and quantitatively determined masses of the total labor of society. That this necessity of the distribution of social labor in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance, is self-evident. … And the form in which this proportional distribution of labor asserts itself, in the state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor, is precisely the exchange value of these products.” (Marx to Kugelmann, July 11, 1868, Letters to Kugelmann, p. 73)

In every society, even on a medieval farm, there are many needs, and the needs have to be satisfied through the many different labors that produce the goods – shoes must be made, cereals cultivated, threshed, baked into bread, etc. Every society needs a distribution of labor among these different branches of production to meet the various needs. In addition to the various needs, the amount of work required must be considered as well. How much work must be spent on cereal crops and how much on manufacturing other products? These decisions have to be made. In every society, there is a proportioning of the various labors. In a planned economy, it is done by a plan. On a medieval farm, the farmer knew that he had to divide his labor into feeding the animals, sowing, reaping, threshing, etc. Labor has to be divided; and that happens in our society as well. But in a society in which no collective will exists; in which no overall plan exists; in which no intentional distribution of work between the different branches of production of goods exists; in which the inter-relationship of the labors of society takes place as the private exchange of individual products of labor, the proportionality of the different labors is established by finding out on the market how much one can get for one’s product. If one gets nothing for one’s product, one has to offer something else. The proportionality of the amounts of labor is established by the fact that the society counts the individual effort as socially necessary labor and rewards it with an equivalent amount. This is what determines whether the individual has been socially necessary labor.

What is meant by “average” and “socially necessary” labor? Within industries that produce the same product, “average” means the average amount of labor which is necessary in this society to produce this good. If someone in the same time produces more than average, then more value is objectified in his labor product than in the same commodity by other producers. If someone produces less, he objectifies less socially necessary average labor and therefore value. In competition – and only in competition – what is called average social labor is asserted. At the same time, how much socially necessary total labor time is generally used in picking strawberries or in producing electric clocks is asserted. So if all producers in the clock industry only need the average working time in order to make their clocks, but overall too many clocks are made, what one learns after the fact what then asserts itself against all clock manufacturers: too much social labor has been used in this sector. Then the producers of clocks are not able to obtain the socially necessary average labor because too much labor has been used in making clocks. Each then has used less socially necessary labor time than he has individually put into it – regardless of the fact that his labor attains the average within that industry. It is not the purpose in this society to produce necessities. Rather, social necessity is asserted by the willingness of customers to pay money for a product.[2]

What are the consequences of this for the division of labor? It is social production; each producer considers a social need. Each produces for others. In this society, there is a division of labor in production, but the labor is not divided. Each produces for society, but only learns afterward in the market whether he has produced for the society – or not. He then learns whether society has rewarded his effort as socially necessary labor. In this society, one does not get one’s labor remunerated; it is rather a fight over how much one can get for it. Everyone must make sure that he gets as much in competition as possible and at the expense of the others, who also want to pay as little as possible.

What role do needs play in this society? Production is for the society’s needs, but not in order to satisfy the needs, but to take advantage of them. Needs are the weakness that the producer wants to exploit in order to get as much as possible from the person who is dependent on the commodity. Need is not the purpose of production, but the means of gain. Production is for social needs and the use-values which others need are produced, but not in order for other people to have their needs met, but so that one can use the product to take advantage of their needs. This implies that needs count to the extent that they are capable of payment; insofar as they can satisfy the property claims of the producers. Needs that can’t pay count for nothing in this society. The needs of people who have no money are economically irrelevant. For example, the media tells us that the pharmaceutical industry has no reason to develop costly drugs in order to fight diseases in the third world because the ability to pay is so low there. That is the role played by needs in this society. Vice versa, if a need is endowed with money, any whim can find a commodity and producer for it. For any kind of nonsense, there are items, while the most urgent needs go unsatisfied if they are not backed with money. A rational system for producing according to the importance of needs and satisfying them is out of the question.

What does production actually aim at? The producer does not see the use-value as the purpose of production. The use-value is the means to produce exchange-value. The producer of commodities wants to get rid of the use-values. What does he want? He wants value, to realize the exchange-value of his commodities, by getting money from selling them. As long as the commodity is not sold, the value is not realized. Only through sale is the use-value of the commodity handed over; when the producer receives the value of the commodity in an independent form separate from the use-value, as a monetary amount. Whether he is successful at this is his private risk. He competes with other suppliers and must see whether the society rewards his individual labor with customers who pay money for it. The idea that someone gets his labor remunerated is nonsensical.

What does one have if one sells the commodity? One has money; or: value. What is money, value? Everyone knows that one can’t eat money. Economists say: money is not an insanity of this economy; its just a medium of exchange for getting hold of use-values; in the end, everything revolves solely around needs. In fact, money sets a new purpose into the world. The wealth in this society which exists in the form of commodities does not consist of the useful things, but of having the power of disposal over the useful things. The power of access to the property of others is the actual purpose of production. Wealth is the social private power to use one’s property to get things that belong to others. Wealth in this society does not consist of useful things, but of power over the wealth and services of others. This power over social wealth has a very different goal than, say, sausage or bread. It’s a goal that is in principle limitless. The rich are those who have a lot of money, and that does not just mean they can afford more sausage and bread. This power of disposal never translates back into consumer items. The wealth which is increased is not the means of consumption, but the whole goal of accumulating social private power in itself. And that is already included in the product insofar as wealth in this society does not consist of use-value, but has a social form that abstracts from use-value. [3]

3. Abstract labor – expended labor is the substance and measure of wealth only in an economy based on exploitation

Marx didn’t think his great discovery was that labor is the substance of exchange-value. Economists long before him had figured out that products are products of labor and exchange because they are products of labor. He was interested in explaining the role played by labor in the creation of value. In Marx’s view, earlier economists like Smith and Ricardo hadn’t seen what this shows about the character of labor in capitalism:

“Initially, the commodity appeared to us as an object with a dual character, possessing both use- value and exchange-value. Later on it was seen that labour, too, has a dual character: in so far as it finds its expression in value, it no longer possesses the same characteristics as when it is the creator of use-values. I was the first to point out and examine critically this two-fold nature of labour contained in commodities … this point is crucial to an understanding of political economy … ” (Karl Marx, Capital, Vol. I, p. 132)

If commodities are equated in exchange, if boot-polish and silk are exchanged in a certain ratio, both are products of labor, and both include socially necessary labor which has been recognized (or not) as socially necessary labor by the exchange. If products of labor are exchanged, then the labor done to produce boot-polish ot silk still involves quite different tasks, so the specificity of the labor can’t be the common quality of the goods, the third thing, because the types of labor in them are qualitatively different. If various types of labor are equated, what then is the thing that makes them equal? Now the question of abstract equality comes up again, about the labor itself:

“If we leave aside the determinant quality of productive activity, and therefore the useful character of labour, what remains is its quality of being an expenditure of human labour-power. … expenditure of human brains, muscles, nerves, hands, etc.” (ibid., p. 134)

Labor only creates value in the sense that it requires sacrifice: in that brain, muscle, and nerves are exerted. The nasty side of labor, that time that is lost in the process is what constitutes the social validity of labor in this society. From a rational point of view, the social accomplishment of labor is the benefit that the labor contributes; the use-values that are produced, not the toil that the labor requires. Labor is negatively connected to benefit.

“In itself, an increase in the quantity of use-values constitutes an increase in material wealth. … Nevertheless, an increase in the amount of material wealth may correspond to a simultaneous fall in the magnitude of value. This contradictory movement arises out of the twofold character of labour. By ‘productivity’ of course, we always mean the productivity of concrete useful labour; in reality this determines only the degree of effectiveness of productive activity directed towards a given purpose within a given period of time. Useful labour, becomes, therefore, a more or less abundant source of products in direct proportion as its productivity rises or falls. As against this, however, variations in productivity have no impact whatever on the labour itself represented in value... [T]he same change in productivity which increases the fruitfulness of labour, and therefore the amount of use-values produced by it, also brings about a reduction in the value of this increased total amount, if it cuts down the total amount of labour-time necessary to to produce the use-values.” (ibid., p. 136-137)

The message here is: the more productive the labor is, the more that labor produces in an hour, the more material wealth that it churns out, the more use-values that become available, the richer a society is. But in a society which is about value, money, about acquiring the social power to have disposal over wealth, toil is the measure of wealth. This means that if producing a commodity takes less labor time, then less value, monetary value, is produced. Material wealth increases, but not monetary wealth. On the contrary: if the amount of work decreases, then the value materialized in a given mass of use values decreases.

This has huge consequences. Society becomes constantly richer as labor becomes more productive and work becomes relatively more superfluous. That is the real blessing of productivity: that the toil of labor decreases, or could decrease. The satisfaction of needs can be met without a need for more labor having to be exerted. But once the purpose is money, about the power to have disposal over wealth, wealth measures itself in the effort, in the sacrifice that must be made in order to produce the product. So when the necessary effort is reduced, the monetary value of the product is reduced. Everyone knows the consumption goods are always getting cheaper. A cell phone is produced and a year later it costs less because productivity has increased. The wealth measured in money can only grow in proportion to the increase in toil. The wealth measured in use-values is enormous, and not as much work needs to be done, but once it is about money, it’s different. In a society in which the purpose of production is money, in which labor produces monetary wealth, there can never be too little work. If the measure of value consists in the labor that is done, hence in toil, then wealth increases to the extent that sweat and tears increase.

Even before Marx makes it clear that the producer of commodities in modern society is not the individual producer who works on his own, but is divided into the entrepreneur who organizes the production of commodities and who owns the products of labor, and the workers who do the necessary work and get a wage for it, he makes it clear that this type of wealth can never be the wealth of those who create this wealth with their labor. This form of wealth, money wealth, is the wealth of a society based on exploitation. A wealth whose substance only grows when toil grows is an irrational form of wealth. A rational form of wealth would consist in labor making itself redundant, not in the effort which generates the wealth. Here is a quote where Marx makes this point:

“For real wealth is the development of the productive powers of all individuals. The measure of wealth then is not any longer, in any way, labour time, but rather disposable time. Labour time as the measure of wealth posits wealth itself as founded on poverty, and disposable time as existing in and because of the anithesis to surplus labour time; or, the positing of an individual’s entire time as labour time, and his degradation therefore to mere worker, subsumption under labour. The most developed machinery thus forces the worker to work longer than the savage does, or than he himself did with the simplest, crudest tools.” (Karl Marx, Grundrisse, p. 708-709)

People now have to work longer than the primitive peoples who were masters of their own labor and worked with the crudest and most rudimentary tools. For those who work, the work never becomes more productive. This is another way of saying: if labor eexpenditure determines wealth, then wealth can only increase to the extent that effort, toil, increase. There can be no rational determination of social wealth when this wealth finds its measure in expended labor. A rational form of social wealth would make labor relatively superfluous. This would mean more leisure time; having more free time and the things you need to live are the rational measures of wealth.

The wealth in our society is measured in toil, in sacrifice. The following sentence shows that Marx is already thinking of wage labor and capital, which were not even mentioned in the first determinations about the commodity and money. And yet the social form of wealth already points to a social conflict. In a developed capitalist economy, the wealth of the few is based on the poverty of the many. This form of social wealth, which is increased through toil, can only exist in a society where the result of labor and the carrying out of labor are assigned to different people. Those who benefit from labor and those who do the labor are not the same people. Because the disposable time of the rich is based on the fact that others work all the time. This is the meaning of the phrase “labour time as the measure of wealth posits wealth itself as founded on poverty.”

4. Concluding remarks

Many readers of the first chapters of Capital on the commodity and money overlook the fact that Marx is criticizing these methods. They pick up on the criticism only when Marx starts talking about wage labor and capital, surplus labor and exploitation. However, the very first pages already make a fundamental critique of the irrationality of this mode of production in which the production of wealth takes place via the sacrifice of the vast majority. The criticism is not that this is unfair. No – here Marx would say that justice corresponds to the economic laws. If you recall the initial comments on the absurdities of the bourgeois economy which pose so many problems – the juxtaposition of wealth and enormous poverty, the phenomenon that labor is ever more productive but there’s no reduction in work as a result, the phenomenon of crises in which everyone tries to earn more and more money and then all of a sudden nobody is earning any anymore – then what has previously been said partly explains why these peculiarities exist.

The juxtaposition of poverty and wealth is not a mystery when the satisfaction of needs is not the purpose of production. If needs are satisfied only to the extent as they are backed by money, then needs are left unsatisfied. And not because it isn’t possible to produce the goods which could meet these needs, but because the satisfaction of needs depends on a business being made out of them. If one has no money, one’s needs are economically irrelevant in our society. In the course of Capital, Marx explains why money concentrates so one-sidedly.

The second question was already answered in the opening sections. Labor becomes ever more productive, but not reduced as a result. If the social purpose of production were to consist in producing use-values to satisfy needs, then labor would be reduced to the extent that labor becomes more productive. Then disposable time would increase to the extent that more stuff is produced in the same time, without requiring any decrease in consumption. On the contrary. But if money, value, is the economic purpose, then there can’t ever be too little toil. Then labor can be more productive, but never reduced.

On the third question, crisis, no answer has been given. But that’s ok. It’s only the abstract starting point for reflections that take Marx a thousand pages to explain. There’s still a lot to explain between the capitalism we see and the starting point of the explanation, that the commodity is the elementary form of wealth in our society.

Footnotes

[1] This conclusion about labor as the third thing that commodities have in common, the thing that constitutes the substance of value, is not shared by bourgeois economics. The economists would say: “One person exchanges boot polish for gold, the other person exchanges gold for boot polish. Why did they exchange them? Because one person values boot polish higher than gold, the other person values gold higher than boot polish. There is nothing in common. If there is an equalization, then it is the equalization of the benefit weighed by both sides.” The thesis is that the benefit is equal. Here Marx would reply that this is a mistake because the benefit always depends on the concrete use-value. The benefit of the bed and the benefit of a bottle of beer are not comparable. It does not make sense to ask: is the beer more useful than the bed or is it the other way around? The utility of a thing is a predicate that expresses a thing is good for a particular need and/or satisfying a particular need. An “abstract” benefit does not exist. By the way, economics itself doubts whether one can compare the utility of different things and then comes up with the idea that if one can’t compare the utility, then one can still compare the utility of bundles of goods: 17 beds and 1 bottle of beer and 17 beers and 1 bed; economics asserts that one should be able to compare these in terms of utility. As if this comparison would be possible without maintaining an abstract utility of goods; one can only say: no such thing exists.

[2] Modern economists argue that Marx did not realize that the price of commodities depends on supply and demand. But Marx did not deny that a price is not obtained without demand, but explained the substance of what is taking place in the market. The market proves whether individually performed labor counts as socially necessary average labor or not. But this is only one side of it. It still has to be explained that value determines supply and demand. In price, the substance of socially necessary labor is asserted. On the other hand, the socially necessary labor in the long term must also be paid or else the product does not exist. If something is needed but doesn’t obtain a price which compensates the producer’s expense, then he stops making the product available. Only when a price is paid that allows the producer to reproduce the product is the product produced and offered. It is noticeable that value is the law of exchange, which does not contradict the fact that everyone wants to pay as little as possible and get as much as possible. This is precisely how socially necessary labor as the measure of exchange is carried out in a society in which no one can say how many products of a certain type are needed or what the social average labor for a pound of bread is because there is no collective decision-making.

[3] The conclusion Marx draws from these qualities of the commodity and the form of social wealth about the relation of the subjects of this economy to the products of their labor is often misunderstood. He talks about the “fetishism of commodities.” The commodity is the objectified form of a social relation in the sense that it is not realized in its use-value, but in its exchange-value. The social relation between the producers appears in this society as what it is, namely: a relation between things. A matter that is really between people who make arrangements between themselves appears to them as a relation between things that have their own autonomy and subordinate the people. One day somebody produces a commodity and it is in demand and they get a price for it which they can live with; and the very next day they produce the same commodity and finds no one buying the commodity. Marx says: instead of people controlling their social relations, people are controlled by their social relations. The abstract point of the fetish section is that people do not control their circumstances. People turn themselves over to being instrumentalized by relations which are not under their own control. They use the social institutions – commodity, money, capital – but do not understand what they are using and do not have control over the institutions they are using.