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

1. Some weird things about the capitalist mode of production that are often cause for concern

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 of making a living. When we look around the world, we see 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 right next to each other. Even in the few successful centers of the world economy, it’s taken for granted that the rich get richer and the ordinary workers are relieved if their real wages don’t continue to fall.

The second absurdity is that the productivity of labor keeps increasing. Twenty-five years ago, it took a lot more people than today to keep the same factories running. 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 labor skyrockets and the 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 illness and people who are desperate to find work. And yet these two groups can’t split up the work between 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 do: 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 engage in the widespread 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 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 reveal

“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 consist of the useful things that 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 something, they know that they must pay attention to the amount they get in 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 what a “correct” exchange ratio would be. What do they think would be the correct exchange? An exchange in which the owner gains nothing and loses nothing. However, from the standpoint of the use-value, one always gains when making an exchange. You get what you need, and you are 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; one is then thinking about the quantity: how much do I get for my money? The idea of the “correct” exchange refers to the value in one’s hands. The valid exchange-value of commodities expresses a match which is with neither the one nor the other commodity, but is a commonality of the commodities. Now comes the conclusion which 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 their 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 are all different. 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 physical qualities? Only that they are products of labor. [1]

Here you might say that this is trivial in the sense that material wealth is only created through labor. This is true in all societies. But it’s not meant to be that simple. The labor that forms the substance of value, the fact that the things exchanged are products of labor, is not the individual, real labor of the individual persons:

“ … [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 that constitutes the substance of value is the socially necessary average labor time. At issue is not whether the labor is fairly rewarded or if one gets more by working more. Here Marx maintains that the value of the labor product doesn’t depend on the individual labor that has actually been expended on it. Vice versa, the individual finds out how much of his individual toil has been realized as socially valid labor in the price his commodity wins on the market.

Critics from bourgeois circles have objected that goods are rarely exchanged exactly according to the labor hours incorporated in the goods. This is meant to be a criticism of Marx, although Marx clearly says that it is not the real, individual labor time that forms the substance of value. It is pretended that Marx wanted to calculate prices by measuring labor hours, only to discover that the real amount of work and prices diverge. As if this was not the result of what Marx is claiming! Marx wasn’t interested in calculating prices. He wanted to say something else, and that can be seen in a letter to his friend Kugelmann where he dealt with these objections. The economists said to Marx: prove your concept of value; prove empirically that working hours are the substance of values and can therefore be used to calculate prices. Marx replies that it is not at all a question of proving 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 these needs have to be met with the many different types of labor that produce goods – shoes must be made, cereals cultivated, threshed, baked into bread, etc. Every society needs to distribute the various labors among these different branches of production to meet the various needs. In addition to the various needs, the amount of labor required must be considered as well. How much labor must be spent on cereal crops and how much on manufacturing other products? These decisions have to be made; in every society, the various labors are allocated. 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 split up; 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 labor among the different branches of production takes place; in which the inter-relationship between the various labors of society takes place through the private exchange of individual products of labor, the allocation of the various labors is done by the individual producers finding out on the market how much they can get for their products. If they don’t get anything for their product, they have to offer something else. The allocation 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 labor was socially necessary labor.

Then the producers of watches cannot achieve what is socially necessary average work, because too much work has been put into the production of watches. Everyone has then used less socially necessary labour than they put in individually. This is without prejudice to the fact that his work is average within his industry. There is no purpose in this society to produce what is necessary. Rather, what is socially necessary is shown in the willingness of customers to pay money for a product

What does Marx mean by “average” and “socially necessary” labor? Within industries that produce the same product, “average” means the average amount of labor required in this society to produce this good. If someone produces more than average in the same amount of time, then his labor objectifies more value than that of other producers of the same commodity. If someone produces less, then he objectifies less socially necessary average labor and therefore value. In competition, and only in competition, is what is called average social labor time revealed. At the same time, it also shows how much socially necessary total labor time is actually used in picking strawberries or making watches. So if everyone in the watch industry only needs the average labor time to make their watches, but too many watches are made in total (which is always learned only afterwards), then it enforces against all watch makers that too much social labor has been put in this sector. Then the watch producers can’t achieve what is socially necessary average labor, because too much labor has been put into making watches. Each producer has then used less socially necessary labor than they put in individually. This is regardless of the fact that his labor is the average within his industry. It is not the purpose in this society to produce what is necessary. Rather, what is socially necesarry is shown 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 finds out 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 are taken into account to the extent that they are capable of payment; to the extent they can satisfy the property claims of the producers. Needs that can’t be paid for don’t matter 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 able to pay, any whim can find a commodity and a producer for it. There are offers for every type of stupidity, 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 their sale. As long as the commodity is not sold, the value is not realized. Only through sale is the commodity’s use-value handed over; when the producer receives the value of the commodity in an independent form separate from the use-value, as a sum of money. 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 is remunerated for his work is nonsense.

What does one have if one sells a commodity? One has money, or value. What is money, value? Everyone knows that you can’t eat money. Economists say: money is not an absurdity 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 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. This power over social wealth aims at something very different than, say, sausage or bread. It’s a goal that is unlimited in principle. Rich people have a lot of money, but that does not just mean they can afford more sausage and bread. This power of disposal is never translated back to 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 that they 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 has its measure in toil and sacrifice. The following sentence shows that Marx was already thinking of wage labor and capital, which were not even mentioned in the first determinations, which were about the commodity and money, because the social form of wealth already points to a social conflict. This is the meaning of the phrase “labour time as the measure of wealth posits wealth itself as founded on poverty.” In a developed capitalist economy, the wealth of the few is based on the poverty of the many. This form of social wealth, which increases with toil, can only exist in a society in which the results of labor and the performance of labor go to different people. Those who are the beneficiaries of labor and those who do the labor are not the same. In capitalism, the disposable time of the rich is based on the fact that others are working all the time.

4. Concluding remarks

Many readers of the first chapters of Capital which deal with the commodity and money overlook the fact that Marx is criticizing these methods. They notice 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 sacrifices of the vast majority. The criticism is not that this is unfair. No – here Marx would say that justice is consistent with 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 work is never reduced, 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 that they are backed by money, then needs are left unsatisfied. 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 unequally.

The second question was already answered in the opening sections. Labor becomes ever more productive, but is not reduced as a result. If the social purpose of production was the production of use-values to satisfy needs, then labor would be reduced to the extent that labor becomes more productive. Then free 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.