Wage, Labour and Capital Questions

[RedStar]

I have been reading Wage, Labor and Capital and would want to ask a few questions.English is not my native language so some words are not familiar to me and it is sometimes hard to really get the meaning because this is rather some complex material (then I should not even think of reading Capital right?).There was also another topic on it called “Study Group on Wage, Labour and Capital.” and i have read that too but i am still uncertain of a few things so I would be grateful if someone clears these questions for me, so that I don’t form some wrong understanding.

So, it says:

…All these components of capital are created by labor, products of labor, accumulated labor. Accumulated labor that serves as a means to new production is capital. …
The dictionary defines capital as:


- Wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation.
- Material wealth used or available for use in the production of more wealth.
So I assume that “accumulated labor” means the things previously produced that are now emplyed in production and serve as a means to expand capital right?


Next:


Thereby, that as an independent social power – i.e., as the power of a part of society – it preserves itself and multiplies by exchange with direct, living labor-power.
What does actually means with “Thereby, that as an independent social power – i.e., as the power of a part of society”? Does it mean that whoever holds capital has the power (as it really is) or something else? I understand the latter part that it can only multiply in relation with wage-labour but I can’t get the first part.



… the capital destined for production – the productive capital…
What is actually productive capital? It says “the capital destined for production”, but isn’t all capital destined for production i.e. multiply itself? So, for example if someone has 10000(name imperial currency) he takes 5000 and puts it into production, so do these 5000 become “productive capital” and the other half just “capital”?




Real wages express the price of labor-power in relation to the price of commodities; relative wages, on the other hand, express the share of immediate labor in the value newly created by it, in relation to the share of it which falls to accumulated labor, to capital.
I can understand this:
nominal wages – the price of wage-labour i.e. the sum of money the worker recieves
real wages – the value of the sum of money he recieves as the proportion with which he exchanges them for other commodities
and relative wages that I didn’t really understood what they are. Do they represent the sum extracted out of the profit and the wages together when the cappie sells his new stuff, or in other words, the proportion of wages in relation to profit?
I couldn’t really understand the second part.



If by the use of the spinning-machine I can furnish twice as much yarn in an hour as before its invention – for instance, 100 pounds instead of 50 pounds – in the long run I receive back, in exchange for this 100 pounds no more commodities than I did before for 50; because the cost of production has fallen by 1/2, or because I can furnish double the product at the same cost.
So, the capitalist implements a new technology and produces 100 pounds at the same cost and time for which he previously produced 50, and, so if he exchanges those 100 at the old price with other commodities he gets the same amount as he did with 50? That confuses me.

[mikelepore]

So, the capitalist implements a new technology and produces 100 pounds at the same cost and time for which he previously produced 50, and, so if he exchanges those 100 at the old price with other commodities he gets the same amount as he did with 50? That confuses me.

Your phrase "if he exchanges those 100 at the old price" seems incorrect. The point is that, when the cost of production drops, the price of the finished product usually drops also. (This assumes the idealized case that modern economists call "perfect competition.")

[Vincent P.]

So I assume that “accumulated labor” means the things previously produced that are now emplyed in production and serve as a means to expand capital right?
That's about it. That's the money used to make more money, which the common worker lacks (and thus he must sell its labour power, in Marx's word).:p



Next:

What does actually means with “Thereby, that as an independent social power – i.e., as the power of a part of society”? Does it mean that whoever holds capital has the power (as it really is) or something else? I understand the latter part that it can only multiply in relation with wage-labour but I can’t get the first part.No I think that's it: money is power.


What is actually productive capital? It says “the capital destined for production”, but isn’t all capital destined for production i.e. multiply itself? So, for example if someone has 10000(name imperial currency) he takes 5000 and puts it into production, so do these 5000 become “productive capital” and the other half just “capital”?
Well the accumulated profit is also called capital by Marx, for it could be used as productive capital (even though it's just accumulated for the sake of accumulating it). Bourgeois are not dumb: they wont invest everything all at once.


I can understand this:

nominal wages – the price of wage-labour i.e. the sum of money the worker recieves
real wages – the value of the sum of money he recieves as the proportion with which he exchanges them for other commodities
and relative wages that I didn’t really understood what they are. Do they represent the sum extracted out of the profit and the wages together when the cappie sells his new stuff, or in other words, the proportion of wages in relation to profit?
I couldn’t really understand the second part.
Gotta have a check for that one. Or maybe some people here could answer?


So, the capitalist implements a new technology and produces 100 pounds at the same cost and time for which he previously produced 50, and, so if he exchanges those 100 at the old price with other commodities he gets the same amount as he did with 50?
That confuses me.
Wow that confuses me as well.:blink:

It's nice that you took time to read that seminal text though. Also try "Prices, Profit and Wages", it's about the same size and it deals with roughly the same stuff. It could answer some questions. They're far away in my memory...

[mikelepore]

What does actually means with “Thereby, that as an independent social power – i.e., as the power of a part of society”? Does it mean that whoever holds capital has the power (as it really is) or something else? I understand the latter part that it can only multiply in relation with wage-labour but I can’t get the first part.

Marx viewed capital as "dead labour", a phrase that he used in_Capital_ chapters 10 and 15, and in the Grundrisse. (Engels also used the phrase in his "Synopsis of Capital" essay. Raya Dunayevskaya also used the phrase "dominion of dead labor.")

For the capitalist to own capital is like owning bags of pieces of old human bones, accumulated remnants of past generations of people.

The capitalist has power over LIVING people because of this ownership of fossils.

[mikelepore]

The dictionary defines capital as:



- Wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation.
- Material wealth used or available for use in the production of more wealth.


That dictionary definition is what Marx tried to abolish in the next few sentences in this pamphlet, so that he suggests a different meaning:

"The existence of a class which possess nothing but the ability to work is a necessary presupposition of capital. It is only the dominion of past, accumulated, materialized labor over immediate living labor that stamps the accumulated labor with the character of capital. Capital does not consist in the fact that accumulated labor serves living labor as a means for new production. It consists in the fact that living labor serves accumulated labor as the means of preserving and multiplying its exchange value."

Elsewhere in this pamphlet, Marx says:

"A Negro is a Negro. Only under certain conditions does he become a slave. A cotton-spinning machine is a machine for spinning cotton. Only under certain conditions does it become capital."

In other words, use of the word "capital" is correct only if class robbery is being performed. The objective of socialism is to make tools **cease to be** capital.

Marx made this point also in the Grundrisse, Notebook #7.

[mikelepore]

"The proletariat transforms the socialized means of production, slipping from the hands of the bourgeoisie into public property. By this act, the proletariat frees the means of production from the character of capital."

-- Engels, in _Socialism: Utopian and Scientific_

[RedStar]

Thanks for the replies. I thought no one would write down.


Your phrase "if he exchanges those 100 at the old price" seems incorrect. The point is that, when the cost of production drops, the price of the finished product usually drops also. (This assumes the idealized case that modern economists call "perfect competition.")
Yes the cost of production drops and that by itself carries the drop in value (the ratio at which the exchange with other commodities is carried out) of the commodity, but not immediately the price. At least certainly not until “perfect competition” is established.
And until that this happens:

But the capitalist will not sell the whole yard so cheaply as his competitors sell the half-yard, although the production of the whole yard costs him no more than does that of the half-yard to the others. …
Moreover, he attains the object he is aiming at if he prices his goods only a small percentage lower than his competitors. He drives them off the field, he wrests from them at least part of their market, by underselling them. Now, doesn’t that capitalist, with the advantage of lower cost of production over the others, making greater profits, isn’t he able to buy/exchange more commodities (for the money he gets from selling those 100 pounds) than he could before (when he produced 50 pounds) ?

To quote again (the crucial part in bolded):

If by the use of the spinning-machine I can furnish twice as much yarn in an hour as before its invention – for instance, 100 pounds instead of 50 pounds – in the long run I receive back, in exchange for this 100 pounds no more commodities than I did before for 50; because the cost of production has fallen by 1/2, or because I can furnish double the product at the same cost. This statement certainly applies in the state of “perfect competition”, or at that later time (I suppose that is what he meant with “in the long run”) when the price of that commodity drops and stays “around (higher or lower than)” the cost of production as the other competitors also implement new technology, because now you will need 100 pounds to exchange for the same amount of some other commodity (taking in account that the cost of production, price and value haven’t changed for it) instead of those 50 pounds as previously. This is certainly valid.
My question refers to if this is true until perfect competition is established.



Bourgeois are not dumb: they wont invest everything all at once.
Of course not, but I assume that under “productive capital” he means the capital immediately put into production/multiplication.

Also try "Prices, Profit and Wages", it's about the same size and it deals with roughly the same stuff. It could answer some questions. They're far away in my memory...
Thanks, I’ll look into it when I have time.

[mikelepore]

At least certainly not until “perfect competition” is established.
And until that this happens:
Now, doesn’t that capitalist, with the advantage of lower cost of production over the others, making greater profits, isn’t he able to buy/exchange more commodities (for the money he gets from selling those 100 pounds) than he could before (when he produced 50 pounds) ?

I think the answer is no to your first question, if I understand what you mean. The capitalist who formerly made and sold quantity Q at price P, before the new machine was invented, and now makes quantity 2Q and sells tham at price one-half P, after all the capitalists are using the new machine, is no better off.

If Marx's model was correct. But I'm not so certain that Marx was correct about this. The new machine may be so expensive that only a few capitalists are making the product, and they may not compete with each other in the ways that were expected of them, but they may rather have an "understanding" about prices.


This statement certainly applies in the state of “perfect competition”, or at that later time (I suppose that is what he meant with “in the long run”) when the price of that commodity drops.

"In the long run" and "pefect competition" are related ideas but not the same thing.

"In the long run" means that if we take examples that are higher numbers than what a theory predicts, and examples that are lower numbers than what a theory predicts, and we take their average, then we will see just what the theory predicts.

"Perfect competition" means an imaginary situation where convenience factors never interfere with the theoretical effects of competition, for example, you don't have the local store that charges a higher price for an article than the supermarket does, which happens in reality because the customer knows it's not worthwhile to travel for an additional hour to see if it's possible to save the difference in price.

[RedStar]

"In the long run" and "pefect competition" are related ideas but not the same thing.
I think You misunderstood me a little. I actually wanted to write "in the long run (starting, with the point, at that time when the so called "perfect competition" is established)".


"Perfect competition" means an imaginary situation where convenience factors never interfere with the theoretical effects of competition, for example, you don't have the local store that charges a higher price for an article than the supermarket does, which happens in reality because the customer knows it's not worthwhile to travel for an additional hour to see if it's possible to save the difference in price.
Hmmm.. ok, but i rather agree with this next description.

Perfect competition describes the perfect being a market in which there are many small firms, all producing homogeneous goods. In general a perfectly competitive market is characterized by the fact that no single firm has influence on the price of the product it sells.Unless some capitalist is "wise" enough to lower his price and face losses.

I am going to give one last try to clearly point out what really confuses me.
Marx wrote that the capitalist will produce 50 pounds and he can exchange these in relevant proportion for other commodities. But he also wrote that even if the capitalist is now enabled to produce 100 pounds at the same cost he will in proportion for these get the same amount of commodities (if their price is unchanged) as he got when he exchange those 50.
While i partly agree with this, i question the validity of this statement in the stage between. Now, you may ask what stage between?

Well, as much as this will look funny and dumb i will use a simple model (surely not applicable in reality but..) to illustrate my point. I am certain that I'll be wrong (well this is a learning forum i am allowed to go wrong right?) but nevertheless i will try and i expect other people to point at my mistakes.


Lets see:

Stage I.
This is the situation where "perfect competition" exists. Lots of sellers and the price is at its minimum while still making profit to the capitalists (if we exclude the possibility of the capitalists making a deal to bring the prices up which i think is rarely accomplished in the state of really high competition and lots of sellers because there will always be someone who will because of greed betray and undersell his competitors even if that moment lasts very shortly). So lets take for example:

U - units (currency), P - pieces (commodities)

Amount produced: 50p
Price: 6u (single commodity)
Cost: 5u (single commodity)(all costs included)
Profit: (price for all)(50p * 6u) 300u - (cost for all)(50p * 5u) 250u = 50u

Price for other commodity he wants to exchange with: 10u
Commodities he gets (if he exchanges all his 50p(their total price is 300u)produced for this other commodity)(300u / 10u): 30p
Commodities he gets (only for the amount of his profit): (profit)50u / 10u = 5p

Now, of course not one capitalist will waste his profit like this but i am just making a theoretical example.


Stage II.
This is the stage where only one of the capitalists by using new technology in the process of production is able to produce twice the amount of commodities at the same cost. And thus, he gets great advantage and opportunity for making high profits. And so as Marx wrote this happens next:

But the capitalist will not sell the whole yard so cheaply as his competitors sell the half-yard, although the production of the whole yard costs him no more than does that of the half-yard to the others. …
Moreover, he attains the object he is aiming at if he prices his goods only a small percentage lower than his competitors. He drives them off the field, he wrests from them at least part of their market, by underselling them. So what we have here is:

Amount produced: 100p
Price: 5u (the capitalist sets the price just under the price of his other competitors in order to undersell them.. see the quote)
Cost: 2.5u (single commodity)(all costs included)
(the cost now is 2.5u because it is for a single item or because the capitalist is now able to produce twice the commodities than before. Actually the cost remains the same in all stages but only when we see it as total for all the commodities)
Profit: (price for all)(100p * 5u) 500u - (cost for all)(100p * 2.5u) 250u = 250u
(here is where we see that the cost has remained the same)

Price for other commodity he wants to exchange with: 10u
Commodities he gets (if he exchanges all his 100p produced for this other commodity): 50p
Commodities he gets (only for the amount of his profit): (profit)250u / 10u = 25p

I hope that now you notice. In the first stage he could if he exchanged all his commodities for this other commodity get 30p but now in the second stage he gets 50p.
The value of this commodity in the exchange proportion for other commodities has fallen so now you need more (or double the) commodities to exchange it for others and get the same amount for 50p as Marx himself wrote. But this is only true in the third stage because here it is not immediately reflected. This one capitalist that has the advantage of lower cost still has higher price/profit ratio that will bring him the opportunity to get more commodities than he will be able to do it later. And this is what i was referring to, all the time, and questioning the validity of Marx's statement into this stage.
And i should note that this happens just at the beginning of this stage or the starting point of the "downward spiral" while only one capitalist has this kind of advantage or monopoly before the second, the third, and so on.. until all the other capitalists bring in the new technology into their process of production and start to under price each other thus bringing us to the third stage.


Stage III.
As i said, the "monopoly" of that one capitalist having the advantage of lower cost of production (per commodity) is only a question of time. When the other capitalists also start to use that new technology they also start to under price each other and so bring the price of the commodity lower and lower so our "dear" (far from that) capitalist that could buy more commodities than he could before is able to do the same less and less until he arrives at that point which Marx pointed out:

in the long run I receive back, in exchange for this 100 pounds no more commodities than I did before for 50;
How so? Because now we again have the same situation of "perfect competition" and so the price is constantly pushed down until at its minimum while still bringing the capitalist profit. And this is the stage where the exchange value is truly reflected (he needs double his commodities to exchange for the same amount as before he could for 50)(again excluding the chance they make a deal for the prices).

Amount produced: 100p
Price: 3u (single commodity)
Cost: 2.5u (single commodity)(all costs included)
Profit: (price for all)(50p * 6u) 300u - (cost for all)(50p * 5u) 250u = 50u

Price for other commodity he wants to exchange with: 10u
Commodities he gets (if he exchanges all his 100p(their total price is 300u) produced for this other commodity)(300u / 10u): 30p
Commodities he gets (only for the amount of his profit): (profit)50u / 10u = 5p


And this is what i wanted to say, that Marx did not point out the stage between i.e. he jumped immediately from stage I to III and he took only the conditions of "perfect competition". Or he wanted us to think about this and realize it ourselves and so he exchanged all this into four words "in the long run".
Well sorry for the long post but i hope now i am clear.

[mikelepore]

There's no point in time when perfect competition operates. It's an ideal case used only for comparison. It's a situation in which

* everyone has perfect information because everyone tells the whole truth,

* everyone is completely rational in knowing what actions will lead to financial gain,

* there are no patents or copyrights or other limitations on the marketplace,

* workers never have to consider the accrual of their eligibility to retire with a pension, so they can suddenly change employers if another employer offers a penny more in salary,

* consumers would travel a thousand miles to obtain a price that's a penny lower.

Perfect competition can never exist, but statements can be made about what would happen if it did exist, or if it were partially approached.

This is one term that a capitalist economist uses in the same way as a Marxian economist. Although various theories differ when they predict would happen if the idealized situation did exist, or were were approached, the meaning of the term is the same in all economic theories.

[Invariance]

No, that is not how perfect competition is defined in modern economics. In modern economics, perfect competition is defined as a market with many buyers and sellers (and by many, I mean an infinite amount) trading identical (homogeneous) products so that each buyer and seller is a price taker (i.e. every buyer and seller is assumed to be infinitesimally small, so as to not in any way be able to affect the market), which means that there are no barriers to entry to and from the market and that all firms and consumers have complete knowledge and all aim at maximizing profit. But Mike is quite right to say that there is no point in time where perfect competition operates.

Marxism certainly posits no theory of perfect competition, although there are cases where they accept the assumptions of neoclassical economics and then show how they are self-contradictory.

[RedStar]

No, that is not how perfect competition is defined in modern economics. In modern economics, perfect competition is defined as a market with many buyers and sellers (and by many, I mean an infinite amount) trading identical (homogeneous) products so that each buyer and seller is a price taker (i.e. every buyer and seller is assumed to be infinitesimally small, so as to not in any way be able to affect the market), which means that there are no barriers to entry to and from the market and that all firms and consumers have complete knowledge and all aim at maximizing profit.
Yes, this is the same thing i learned on the (capitalist) economics classes in school.


But Mike is quite right to say that there is no point in time where perfect competition operates.
Ok, but both of you seem to really understood everything literally. So if you exchange "perfect competition" with "very high competition" will my claims still be valid?

[mikelepore]

RedStar, I'm not the most suitable person to answer questions about a given page of algebraic calculations and whether this is what Marx's theory means. I only read Marx qualitatively. I only think in terms of short examples to understand why the seller of a product gets compensated for labor only to the extent that modern methods have been used. If you went to pick up a pizza, and the shopkeeper said that will be several times the usual price, because they decided to cook it over a fire started by rubbing sticks together, would you pay the additional amount? If you went to buy a pine board, and the shopkeeper said the price will be many times higher than usual, because they decided to cut down the tree with a flint hatchet, would you pay the additional amount? No, you'd walk out and go over to the competitor who uses the modern methods and therefore charges a lower price. So, if a newly invented method with a greater throughput rate becomes the industry standard, the unit price usually drops. Simple as that. No math needed.