Mike Fakelastname
12th August 2004, 11:05
Labor Theory of Value:
First off, a little history behind the Labor Theory of Value; Karl Marx, although he did not invent it, was the first to organize a hypothesis. He goes into great detail with specific mathematical examples of the LTV in The Critique of Political Economy and Das Kapital. The LTV was Marx’s main contribution to modern economic theory, and is for the most part widely accepted among modern economists.
The principle behind the LTV is that the value of a commodity is directly related to the labor required to produce it. An example would be how a gold chain is worth more than a plastic chain. The gold must be mined, melted, refined, shaped, and sold to the consumer. As you can see, producing a gold chain involves much more labor than producing a plastic chain. Other factors can be attributed to the gold chain being more valuable than the plastic one, such as the gold’s scarcity, but the overriding factor that influences the high value of gold is the amount of labor required to produce it (I will go into much greater detail on this in the next section). Other factors of a changing value other than labor and rarity include consumer demand and the practical application of the commodity (you can put as much labor as you want into producing a horse and buggy cart, but it isn’t going to be of much worth in the gasoline powered automobile age), these are simply examples of use-values, and factors which affect productivity.
S = C - W
S = Value of the surplus labor
C = Value of the commodity
W = Value of the worker's wage
When we look at the LTV a bit more deeply though, we see several other principles. The foundation of capitalism rests entirely on the fact that labor costs can never exceed the price of the commodity. Let's say that a worker in a baseball glove factory earns $10 per hour, and he/she works 9 hours a day. The labor costs of that worker are therefore 90$ per day. The worker works the whole day, and produces $600 (subtracting the production costs, like cost of materials, electricity, etc) worth of baseball gloves; the surplus value of his or her labor (600-90) is $510. Let me state this again, while the worker produces $600 worth of the commodity, he/she is paid only $90, thus the surplus -- or stolen -- labor is worth $510.
The proletariat is forced to sell the only thing they can possibly offer to survive, their labor. Obviously, they will sell to the highest bidder. Unfortunately, as we've seen in the previous example, the capitalist class screws the working class out of a whole lot of their well-earned money.
Commodities, use-value, exchange-value, and labor:
To begin we must first define a commodity, most economists define this as “anything that is useful or necessary to all or some of the various inhabitants of society.” Though that’s the essence of it, the definition of a commodity goes deeper than that; a commodity is anything containing value in of itself. There are two main types of values, use-value, and exchange-value; I will let Marx define them in his own words. In fact, note that everything in quotations is from him.
Use-value: “An aspect of the commodity which coincides with the physical palpable existence of the commodity… A use-value has value only in use, and is realized only in the process of consumption.”
For example, a loaf of bread has a use-value distinctly it’s own, it differs from a bushel of hay’s use value, and it differs from a stack of bricks’ use value. Use-values are related to each other, and exchanged in proportions varying on the universal labor time, or work, that is required to produce them. For example, you could say that 15 loaves of bread is worth about two bushels of hay, or a stack of 25 bricks (note: keep in mind that these are simply examples). What is this “universal labor time” I speak of? I’ll get to that shortly.
Before I go into exchange value, we should probably define another term, abstract general labor. Abstract general labor is labor that creates exchange-value. Labor is measured in units of time. It is important here to disregard the quality of labor, and only focus on the quantity. This is no abstraction (this is so simply because of the fact that you can express a commodity’s exchange-value with a specific quantity of any other commodity, as illustrated in the next paragraph); this is just an averaging out, defined as “universal” or “social” labor. Person A works for 6 hours and produces 15 loaves of bread, Person B works for 6 hours and produces 25 bricks, thus 15 loaves of bread have the same exchange-value that 25 bricks do.
Suppose that an unskilled worker and a skilled worker work to produce the same commodity; it takes the unskilled worker 3 hours to produce a set quantity of use-value, it takes the skilled worker only 2. However, the exchange-value between them is exactly the same, why is this? The workers produce the same amount of use-value of the same commodity in different amounts of time--for example both produce 10 pounds of fish (they're fishermen) in different amounts of time--however, 10 pounds of fish are worth the same as, let's say 3 yard of silk, irrespective of who produces it, thus the exchange-value of fish is determined by the labor-time necessary to produce it, or in other words, the average amount of labor-time it takes all individuals to produce a set quantity of use-value.
Exchange-value: “Exchange-value seems at first to be a quantitative relation, the proportion in which use-values are exchanged for one another.”
Keep in mind that Marx implies “the proportion in which [ALL] use-values are…”, but in order to give a possible example, we will simplify this in terms of just bread, hay, and bricks. We have already said that:
15 loaves of bread = 2 bushels of hay
and
15 loaves of bread = 25 bricks
Exchange-value is simply the proportion in which they are more or less valuable. As a nice, simple example, let’s say that 15 loaves of bread are worth 3 units of currency. 2 bushels of hay are also worth 3 units of currency, and so are 25 bricks, if this is the case, then 5 loaves of bread are also worth 1 unit of currency, as well are 2/3 of a bushel of hay and 8 to 9 bricks! This is true because as the example I used shows, it takes the same amount of required universal labor time to produce 15 loaves of bread as it does 2 bushels of hay and 25 bricks. “Two [or more] commodities which have different use-values but the same amount of labor-time have the same exchange-value.”
I have defined and explained each of the terms, now I will discuss the relationship between them. As you know, the specific labor-time is what most directly affects exchange-value of specific commodities; individual commodities’ use-values with exceptionally high exchange-values in comparison to other commodities’ use-values take more labor-time to produce this commodity in question. In other words, the more labor-time required to produce one unit of a use-value of a particular commodity, let’s say a rifle, gives it a higher exchange-value than 1 loaf of bread, which takes much less labor-time to produce. 1 rifle would be the equivalent in labor-time of many loaves of bread.
With this in mind, let us examine the exchange-value relationships between bread and bricks. As we know, while labor is the only thing that truly “creates” exchange-value, there are other factors that influence it; natural circumstances can aid or inhibit production. In a good wheat-harvesting season (where resources to produce bread are relatively abundant), the productivity of general labor required to create bread grow, thus less labor is expanded in producing the same amount of use-value (thus there is less exchange-value per one unit of bread). In this condition, the exchange-value of bread would drop from 15 loaves of bread being the labor-time equivalent of 25 bricks to:
20 loaves of bread = 25 bricks
Marx sums it up best, as always, “The smaller the volume of a use-value which contains a given amount of labor-time as compared with other use-values of commodities, the greater is the specific exchange-value of that commodity.” I was formerly talking about the opposite condition, abundance; Marx speaks of scarcity in that quote.
There are of course many different possible relationships between use-value, exchange-value, and labor-time, to list them all would be redundant. It’s time now to discuss commodities and their relationships to use-value and exchange-value. A commodity, as it is important to realize, contains both use-value and exchange-value, but not at the same time. A commodity is use-value when the specific use-value of the commodity is being met only after the exchange-value has been realized, i.e. after it has been exchanged. A commodity would not be a commodity if it were use-value for its owner, as he satisfied his own needs through his own labor and no social exchange would have been made.
For example, if a baker grew his own wheat to produce the bread he sold, the wheat would not be a commodity, on the other hand, if he bought/traded other commodities for wheat from farmers (this is where the exchange-value of the wheat is realized) and in turn produced bread (this is where the use-value of the wheat is realized), the wheat in that scenario would have been a commodity. The farmers do not produce it for their own consumption, but to exchange for other commodities/money. It is in this two-dimensional process that use-value and exchange-value unite to form a commodity, and arbitrarily the whole means of social exchange.
What then, of money? In the exchange process of most societies, there always seems to be one commodity set apart from all the rest, a universal equivalent of exchange-value. The commodity’s use-value is the same for everyone, to be a carrier of exchange-value, a universal standard of exchange; to be currency, which represents a crystallization of universal labor-time, to which all commodities are compared. The exchange-values of all commodities must, in an elaborate exchange process, be able to confront each other not as use-values, but as exchange-values; in this need, money is evolved spontaneously, not purposefully; money facilitates this need in being the universal equivalent of exchange-value. It is important to stress that money IS a commodity, it does not exist outside the exchange-process; the universal labor-time invested in producing one dollar bill is equivalent to the labor-time necessary to produce one 20 oz. bottle of soda, for example.
Historical Materialism:
“I can then infer that communism goes contradictory to human nature. With that, it'd explain the massive collapse of the Soviet Union. Now, before you get ahead of yourself, and say China is the shining light of a communistic society. No, no they're not. In recent years, they too have realized the validity of my assumptions and adopted some capitalistic policies (Russia did too, Lenin allowed small farmers to own their own farms). Now, individuals in China can own small businesses, factories, etc. Also, they have a relatively free market. If you want to set up a factory there, you won't have to worry about environmental regulations.” – Some capitalist supporter debating me
Why would you suppose that I thought China was "the shining light of a communistic society"? I really don't, it's a well-known fact that communist China is abhorrent compared to capitalist America, and is not an example of a working communist--or socialist for that matter--society. This is not due to the defects in communist ideology; this is due to how China was not "ripe" for socialism at the time of the communist revolution.
What do I mean by "ripe" you ask? It will take a minute to answer that, it has to do with Karl Marx's historical evolution philosophy, Historical Materialism. This basically says that history progresses or evolves through stages of class struggle, and that upon the liberation of the proletariat, communism, the class struggle will be over and the proletariat would have achieved his historic goal. Each stage is born when the productive forces of society advance to where the economic system they exist in cannot contain them any longer, and a new epoch of history is formed, each more advanced than the last. I'll give you a fairly long quote from Friedrich Engels, which describes the different stages and how production was relevant to them:
Let us briefly sum up our sketch of historical evolution.
I. Mediaeval Society — Individual production on a small scale. Means of production adapted for individual use; hence primitive, ungainly, petty, dwarfed in action. Production for immediate consumption, either of the producer himself or his feudal lord. Only where an excess of production over this consumption occurs is such excess offered for sale, enters into exchange. Production of commodities, therefore, only in its infancy. But already it contains within itself, in embryo, anarchy in the production of society at large.
II. Capitalist Revolution — transformation of industry, at first be means of simple cooperation and manufacture. Concentration of the means of production, hitherto scattered, into great workshops. As a consequence, their transformation from individual to social means of production — a transformation which does not, on the whole, affect the form of exchange. The old forms of appropriation remain in force. The capitalist appears. In his capacity as owner of the means of production, he also appropriates the products and turns them into commodities. Production has become a social act. Exchange and appropriation continue to be individual acts, the acts of individuals. The social product is appropriated by the individual capitalist. Fundamental contradiction, whence arise all the contradictions in which our present-day society moves, and which modern industry brings to light.
A. Severance of the producer from the means of production. Condemnation of the worker to wage-labor for life. Antagonism between the proletariat and the bourgeoisie.
B. Growing predominance and increasing effectiveness of the laws governing the production of commodities. Unbridled competition. Contradiction between socialized organization in the individual factory and social anarchy in the production as a whole.
C. On the one hand, perfecting of machinery, made by competition compulsory for each individual manufacturer, and complemented by a constantly growing displacement of laborers. Industrial reserve-army. On the other hand, unlimited extension of production, also compulsory under competition, for every manufacturer. On both sides, unheard-of development of productive forces, excess of supply over demand, over-production and products — excess there, of laborers, without employment and without means of existence. But these two levers of production and of social well-being are unable to work together, because the capitalist form of production prevents the productive forces from working and the products from circulating, unless they are first turned into capital — which their very superabundance prevents. The contradiction has grown into an absurdity. The mode of production rises in rebellion against the form of exchange.
D. Partial recognition of the social character of the productive forces forced upon the capitalists themselves. Taking over of the great institutions for production and communication, first by joint-stock companies, later in by trusts, then by the State. The bourgeoisie demonstrated to be a superfluous class. All its social functions are now performed by salaried employees.
III. Proletarian Revolution — Solution of the contradictions. The proletariat seizes the public power, and by means of this 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 they have thus far borne, and gives their socialized character complete freedom to work itself out. Socialized production upon a predetermined plan becomes henceforth possible. The development of production makes the existence of different classes of society thenceforth an anachronism. In proportion as anarchy in social production vanishes, the political authority of the State dies out. Man, at last the master of his own form of social organization, becomes at the same time the lord over Nature, his own master — free.
To accomplish this act of universal emancipation is the historical mission of the modern proletariat. To thoroughly comprehend the historical conditions and this the very nature of this act, to impart to the now oppressed proletarian class a full knowledge of the conditions and of the meaning of the momentous act it is called upon to accomplish, this is the task of the theoretical expression of the proletarian movement, scientific Socialism.
So anyway, back on China. The productive forces of their society were not prepared for a more advanced system; this is the cause of China’s economic failure, not some kind of flaw in Marxist philosophy. China's workers have no more political and social power than they would under full capitalism, in fact probably much less.
Capitalism, in it's current state, was/is an inevitable state, just as it's parent economic system, feudalism. Let me restate what I previously said about Marx's philosophy of Historical Materialism. According to Marx, history progresses and advances through stages/epochs/eras, and each phase is inevitable and impossible to avoid. The next epoch comes along when the old epoch becomes obsolete, and starts to digress. Marx believed that the social aspect of the world was constantly advancing, and it all related to economics and production, "charging" as he put it, like a runaway train, and couldn't be stopped, in fact it will never stop, not by force, not by anything. Marx has been thus far absolutely and undeniably correct about that.
Once the capitalist system becomes, to put it bluntly, "obsolete", a new epoch of history will be formed, socialism. In other words, once the conditions of the productive forces advanced so far that capitalism couldn’t contain them; it will facilitate a proletarian dictatorship where production is at such a level that it can and will supply all members of society. It is how and when it will come, that we Marxists are currently debating over. Some socialists believe that a world revolution will be the driving force that brings the socialist system about; others believe that capitalism will progress into socialism from the inside and not through outward forces (like revolution). Pay attention to what I said there, “only after capitalism becomes functionally obsolete will socialism come”, premature "revolution" will get us nowhere fast (as you've seen in Russia, China, Cuba, Angola, Eastern Europe, Rwanda, Guatemala, Zaire, Bolivia, etc.). From socialism, communism is the next logical step. From there, who knows? Marx never referred to communism as the last stop in economic advancement.
"No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of the old society." - Marx
"In a higher phase of communist society . . . only then can the narrow horizon of bourgeois right be fully left behind and society inscribe on its banners: from each according to his ability, to each according to his needs." - Marx
"History repeats itself, first as tragedy, second as farce." - Marx
"Men make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly found, given and transmitted from the past. The tradition of all the dead generations weighs like a nightmare on the brain of the living." - Marx
"History is nothing but the activity of men in pursuit of their ends. " - Marx
"It is absolutely impossible to transcend the laws of nature. What can change in historically different circumstances is only the form in which these laws expose themselves." – Marx
First off, a little history behind the Labor Theory of Value; Karl Marx, although he did not invent it, was the first to organize a hypothesis. He goes into great detail with specific mathematical examples of the LTV in The Critique of Political Economy and Das Kapital. The LTV was Marx’s main contribution to modern economic theory, and is for the most part widely accepted among modern economists.
The principle behind the LTV is that the value of a commodity is directly related to the labor required to produce it. An example would be how a gold chain is worth more than a plastic chain. The gold must be mined, melted, refined, shaped, and sold to the consumer. As you can see, producing a gold chain involves much more labor than producing a plastic chain. Other factors can be attributed to the gold chain being more valuable than the plastic one, such as the gold’s scarcity, but the overriding factor that influences the high value of gold is the amount of labor required to produce it (I will go into much greater detail on this in the next section). Other factors of a changing value other than labor and rarity include consumer demand and the practical application of the commodity (you can put as much labor as you want into producing a horse and buggy cart, but it isn’t going to be of much worth in the gasoline powered automobile age), these are simply examples of use-values, and factors which affect productivity.
S = C - W
S = Value of the surplus labor
C = Value of the commodity
W = Value of the worker's wage
When we look at the LTV a bit more deeply though, we see several other principles. The foundation of capitalism rests entirely on the fact that labor costs can never exceed the price of the commodity. Let's say that a worker in a baseball glove factory earns $10 per hour, and he/she works 9 hours a day. The labor costs of that worker are therefore 90$ per day. The worker works the whole day, and produces $600 (subtracting the production costs, like cost of materials, electricity, etc) worth of baseball gloves; the surplus value of his or her labor (600-90) is $510. Let me state this again, while the worker produces $600 worth of the commodity, he/she is paid only $90, thus the surplus -- or stolen -- labor is worth $510.
The proletariat is forced to sell the only thing they can possibly offer to survive, their labor. Obviously, they will sell to the highest bidder. Unfortunately, as we've seen in the previous example, the capitalist class screws the working class out of a whole lot of their well-earned money.
Commodities, use-value, exchange-value, and labor:
To begin we must first define a commodity, most economists define this as “anything that is useful or necessary to all or some of the various inhabitants of society.” Though that’s the essence of it, the definition of a commodity goes deeper than that; a commodity is anything containing value in of itself. There are two main types of values, use-value, and exchange-value; I will let Marx define them in his own words. In fact, note that everything in quotations is from him.
Use-value: “An aspect of the commodity which coincides with the physical palpable existence of the commodity… A use-value has value only in use, and is realized only in the process of consumption.”
For example, a loaf of bread has a use-value distinctly it’s own, it differs from a bushel of hay’s use value, and it differs from a stack of bricks’ use value. Use-values are related to each other, and exchanged in proportions varying on the universal labor time, or work, that is required to produce them. For example, you could say that 15 loaves of bread is worth about two bushels of hay, or a stack of 25 bricks (note: keep in mind that these are simply examples). What is this “universal labor time” I speak of? I’ll get to that shortly.
Before I go into exchange value, we should probably define another term, abstract general labor. Abstract general labor is labor that creates exchange-value. Labor is measured in units of time. It is important here to disregard the quality of labor, and only focus on the quantity. This is no abstraction (this is so simply because of the fact that you can express a commodity’s exchange-value with a specific quantity of any other commodity, as illustrated in the next paragraph); this is just an averaging out, defined as “universal” or “social” labor. Person A works for 6 hours and produces 15 loaves of bread, Person B works for 6 hours and produces 25 bricks, thus 15 loaves of bread have the same exchange-value that 25 bricks do.
Suppose that an unskilled worker and a skilled worker work to produce the same commodity; it takes the unskilled worker 3 hours to produce a set quantity of use-value, it takes the skilled worker only 2. However, the exchange-value between them is exactly the same, why is this? The workers produce the same amount of use-value of the same commodity in different amounts of time--for example both produce 10 pounds of fish (they're fishermen) in different amounts of time--however, 10 pounds of fish are worth the same as, let's say 3 yard of silk, irrespective of who produces it, thus the exchange-value of fish is determined by the labor-time necessary to produce it, or in other words, the average amount of labor-time it takes all individuals to produce a set quantity of use-value.
Exchange-value: “Exchange-value seems at first to be a quantitative relation, the proportion in which use-values are exchanged for one another.”
Keep in mind that Marx implies “the proportion in which [ALL] use-values are…”, but in order to give a possible example, we will simplify this in terms of just bread, hay, and bricks. We have already said that:
15 loaves of bread = 2 bushels of hay
and
15 loaves of bread = 25 bricks
Exchange-value is simply the proportion in which they are more or less valuable. As a nice, simple example, let’s say that 15 loaves of bread are worth 3 units of currency. 2 bushels of hay are also worth 3 units of currency, and so are 25 bricks, if this is the case, then 5 loaves of bread are also worth 1 unit of currency, as well are 2/3 of a bushel of hay and 8 to 9 bricks! This is true because as the example I used shows, it takes the same amount of required universal labor time to produce 15 loaves of bread as it does 2 bushels of hay and 25 bricks. “Two [or more] commodities which have different use-values but the same amount of labor-time have the same exchange-value.”
I have defined and explained each of the terms, now I will discuss the relationship between them. As you know, the specific labor-time is what most directly affects exchange-value of specific commodities; individual commodities’ use-values with exceptionally high exchange-values in comparison to other commodities’ use-values take more labor-time to produce this commodity in question. In other words, the more labor-time required to produce one unit of a use-value of a particular commodity, let’s say a rifle, gives it a higher exchange-value than 1 loaf of bread, which takes much less labor-time to produce. 1 rifle would be the equivalent in labor-time of many loaves of bread.
With this in mind, let us examine the exchange-value relationships between bread and bricks. As we know, while labor is the only thing that truly “creates” exchange-value, there are other factors that influence it; natural circumstances can aid or inhibit production. In a good wheat-harvesting season (where resources to produce bread are relatively abundant), the productivity of general labor required to create bread grow, thus less labor is expanded in producing the same amount of use-value (thus there is less exchange-value per one unit of bread). In this condition, the exchange-value of bread would drop from 15 loaves of bread being the labor-time equivalent of 25 bricks to:
20 loaves of bread = 25 bricks
Marx sums it up best, as always, “The smaller the volume of a use-value which contains a given amount of labor-time as compared with other use-values of commodities, the greater is the specific exchange-value of that commodity.” I was formerly talking about the opposite condition, abundance; Marx speaks of scarcity in that quote.
There are of course many different possible relationships between use-value, exchange-value, and labor-time, to list them all would be redundant. It’s time now to discuss commodities and their relationships to use-value and exchange-value. A commodity, as it is important to realize, contains both use-value and exchange-value, but not at the same time. A commodity is use-value when the specific use-value of the commodity is being met only after the exchange-value has been realized, i.e. after it has been exchanged. A commodity would not be a commodity if it were use-value for its owner, as he satisfied his own needs through his own labor and no social exchange would have been made.
For example, if a baker grew his own wheat to produce the bread he sold, the wheat would not be a commodity, on the other hand, if he bought/traded other commodities for wheat from farmers (this is where the exchange-value of the wheat is realized) and in turn produced bread (this is where the use-value of the wheat is realized), the wheat in that scenario would have been a commodity. The farmers do not produce it for their own consumption, but to exchange for other commodities/money. It is in this two-dimensional process that use-value and exchange-value unite to form a commodity, and arbitrarily the whole means of social exchange.
What then, of money? In the exchange process of most societies, there always seems to be one commodity set apart from all the rest, a universal equivalent of exchange-value. The commodity’s use-value is the same for everyone, to be a carrier of exchange-value, a universal standard of exchange; to be currency, which represents a crystallization of universal labor-time, to which all commodities are compared. The exchange-values of all commodities must, in an elaborate exchange process, be able to confront each other not as use-values, but as exchange-values; in this need, money is evolved spontaneously, not purposefully; money facilitates this need in being the universal equivalent of exchange-value. It is important to stress that money IS a commodity, it does not exist outside the exchange-process; the universal labor-time invested in producing one dollar bill is equivalent to the labor-time necessary to produce one 20 oz. bottle of soda, for example.
Historical Materialism:
“I can then infer that communism goes contradictory to human nature. With that, it'd explain the massive collapse of the Soviet Union. Now, before you get ahead of yourself, and say China is the shining light of a communistic society. No, no they're not. In recent years, they too have realized the validity of my assumptions and adopted some capitalistic policies (Russia did too, Lenin allowed small farmers to own their own farms). Now, individuals in China can own small businesses, factories, etc. Also, they have a relatively free market. If you want to set up a factory there, you won't have to worry about environmental regulations.” – Some capitalist supporter debating me
Why would you suppose that I thought China was "the shining light of a communistic society"? I really don't, it's a well-known fact that communist China is abhorrent compared to capitalist America, and is not an example of a working communist--or socialist for that matter--society. This is not due to the defects in communist ideology; this is due to how China was not "ripe" for socialism at the time of the communist revolution.
What do I mean by "ripe" you ask? It will take a minute to answer that, it has to do with Karl Marx's historical evolution philosophy, Historical Materialism. This basically says that history progresses or evolves through stages of class struggle, and that upon the liberation of the proletariat, communism, the class struggle will be over and the proletariat would have achieved his historic goal. Each stage is born when the productive forces of society advance to where the economic system they exist in cannot contain them any longer, and a new epoch of history is formed, each more advanced than the last. I'll give you a fairly long quote from Friedrich Engels, which describes the different stages and how production was relevant to them:
Let us briefly sum up our sketch of historical evolution.
I. Mediaeval Society — Individual production on a small scale. Means of production adapted for individual use; hence primitive, ungainly, petty, dwarfed in action. Production for immediate consumption, either of the producer himself or his feudal lord. Only where an excess of production over this consumption occurs is such excess offered for sale, enters into exchange. Production of commodities, therefore, only in its infancy. But already it contains within itself, in embryo, anarchy in the production of society at large.
II. Capitalist Revolution — transformation of industry, at first be means of simple cooperation and manufacture. Concentration of the means of production, hitherto scattered, into great workshops. As a consequence, their transformation from individual to social means of production — a transformation which does not, on the whole, affect the form of exchange. The old forms of appropriation remain in force. The capitalist appears. In his capacity as owner of the means of production, he also appropriates the products and turns them into commodities. Production has become a social act. Exchange and appropriation continue to be individual acts, the acts of individuals. The social product is appropriated by the individual capitalist. Fundamental contradiction, whence arise all the contradictions in which our present-day society moves, and which modern industry brings to light.
A. Severance of the producer from the means of production. Condemnation of the worker to wage-labor for life. Antagonism between the proletariat and the bourgeoisie.
B. Growing predominance and increasing effectiveness of the laws governing the production of commodities. Unbridled competition. Contradiction between socialized organization in the individual factory and social anarchy in the production as a whole.
C. On the one hand, perfecting of machinery, made by competition compulsory for each individual manufacturer, and complemented by a constantly growing displacement of laborers. Industrial reserve-army. On the other hand, unlimited extension of production, also compulsory under competition, for every manufacturer. On both sides, unheard-of development of productive forces, excess of supply over demand, over-production and products — excess there, of laborers, without employment and without means of existence. But these two levers of production and of social well-being are unable to work together, because the capitalist form of production prevents the productive forces from working and the products from circulating, unless they are first turned into capital — which their very superabundance prevents. The contradiction has grown into an absurdity. The mode of production rises in rebellion against the form of exchange.
D. Partial recognition of the social character of the productive forces forced upon the capitalists themselves. Taking over of the great institutions for production and communication, first by joint-stock companies, later in by trusts, then by the State. The bourgeoisie demonstrated to be a superfluous class. All its social functions are now performed by salaried employees.
III. Proletarian Revolution — Solution of the contradictions. The proletariat seizes the public power, and by means of this 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 they have thus far borne, and gives their socialized character complete freedom to work itself out. Socialized production upon a predetermined plan becomes henceforth possible. The development of production makes the existence of different classes of society thenceforth an anachronism. In proportion as anarchy in social production vanishes, the political authority of the State dies out. Man, at last the master of his own form of social organization, becomes at the same time the lord over Nature, his own master — free.
To accomplish this act of universal emancipation is the historical mission of the modern proletariat. To thoroughly comprehend the historical conditions and this the very nature of this act, to impart to the now oppressed proletarian class a full knowledge of the conditions and of the meaning of the momentous act it is called upon to accomplish, this is the task of the theoretical expression of the proletarian movement, scientific Socialism.
So anyway, back on China. The productive forces of their society were not prepared for a more advanced system; this is the cause of China’s economic failure, not some kind of flaw in Marxist philosophy. China's workers have no more political and social power than they would under full capitalism, in fact probably much less.
Capitalism, in it's current state, was/is an inevitable state, just as it's parent economic system, feudalism. Let me restate what I previously said about Marx's philosophy of Historical Materialism. According to Marx, history progresses and advances through stages/epochs/eras, and each phase is inevitable and impossible to avoid. The next epoch comes along when the old epoch becomes obsolete, and starts to digress. Marx believed that the social aspect of the world was constantly advancing, and it all related to economics and production, "charging" as he put it, like a runaway train, and couldn't be stopped, in fact it will never stop, not by force, not by anything. Marx has been thus far absolutely and undeniably correct about that.
Once the capitalist system becomes, to put it bluntly, "obsolete", a new epoch of history will be formed, socialism. In other words, once the conditions of the productive forces advanced so far that capitalism couldn’t contain them; it will facilitate a proletarian dictatorship where production is at such a level that it can and will supply all members of society. It is how and when it will come, that we Marxists are currently debating over. Some socialists believe that a world revolution will be the driving force that brings the socialist system about; others believe that capitalism will progress into socialism from the inside and not through outward forces (like revolution). Pay attention to what I said there, “only after capitalism becomes functionally obsolete will socialism come”, premature "revolution" will get us nowhere fast (as you've seen in Russia, China, Cuba, Angola, Eastern Europe, Rwanda, Guatemala, Zaire, Bolivia, etc.). From socialism, communism is the next logical step. From there, who knows? Marx never referred to communism as the last stop in economic advancement.
"No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of the old society." - Marx
"In a higher phase of communist society . . . only then can the narrow horizon of bourgeois right be fully left behind and society inscribe on its banners: from each according to his ability, to each according to his needs." - Marx
"History repeats itself, first as tragedy, second as farce." - Marx
"Men make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly found, given and transmitted from the past. The tradition of all the dead generations weighs like a nightmare on the brain of the living." - Marx
"History is nothing but the activity of men in pursuit of their ends. " - Marx
"It is absolutely impossible to transcend the laws of nature. What can change in historically different circumstances is only the form in which these laws expose themselves." – Marx