Lecture 12: Surplus and Capitalism (Karl Marx)

what does Latham argue?

“feeding the world” is the principal public relations gambit of international agribusiness

the FAO’s estimate about global food needs by 2030 and 2050 are underestimates

what would Smith argue about the need to feed more people by 2030?

countries have to adopt innovations that increase productivity

sending food aid to other countries is a bad idea- lowers prices for farmers in the that country and they don’t have an incentive to increase productivity (prevent market signals from moving between consumers and producers)

what is Malthus’s view?

food production needs to keep up with population and population will outstrip food supply

what do Smith and Marx have in common?

the division of labor drives productivity gains

price and value are different

labor theory of value

division of society into classes; laborers, capitalists and landlords

use value

the commodity has an intrinsic value; the product has reached its end in the market

what transformation does use value facilitate?

transformation of money into commodities for consumption

commodities as means of production

commodities that are utilized to produce other goods or services

essential inputs in the production process and are not intended for direct consumption

what realizes the value of labor?

labor is realized through the exchange of commodities in the market, where it is evaluated based on the value produced

commodity fetishism

people only interact with each other through commodities and assign social value to objects, obscuring the relationships and labor behind their production.

commodities as capital

commodities that are used not just for production, but also for generating profit in capitalist systems

money turned into commodities that then turn

C-M-C is motivated by

use value

M-C-M’ is motivated by

profit

M’ is the surplus value generated from labor; the value labor produces is greater than the value of their wages

C-M-C

a product is taken and sold in the market for money, that money is then used to buy a commodity

Marx and Smith believe that ________ ______ is key

productivity growth

for Marx and Smith, they both believe that:

competition drives technological innovation

supply and demand interact to set prices

profits drive investment and future production

recognition that this is historically novel

the General Law of Capitalist Accumulation

a firm with more capital can afford to develop and implement new technologies and organizational structures (division of labor), leading to economies of scale

machinery is expensive, and therefore you need enough capital to make use of it, labor becomes a diminishing share of capital

money is spent on machinery and technology- big firms can produce things more cheaply

battle of competition is won by firms that, can afford and utilize the technologies

the organic composition of capital

the ratio of constant to variable capital

constant capital

capital invested in equipment, land, and inputs; contains value but does not add new value (passes value along)

variable capital

capital invested in labor (creates new value)

with innovation and increasing economies of scale, what happens to the ratio of the organic composition of capital?

tendency is for the ratio of organic composition of capital to rise

the share of labor in the total production of commodities goes down

companies that employ less ______, are more profitable because they can charge less (competition is decided on the basis of price)

labor

relative surplus population

gross labor may increase, but its share of total capital invested declines (it takes less labor to produce a good) resulting in a surplus of workers who cannot find employment (industrial reserve army)

with the increasing ratio of the organic composition of capital, what happens to jobs?

there are less jobs, supply of labor exceeds demand

is the relative surplus population of labor natural?

no it is due to the capitalist system

the absolute general law of capitalist accumulation

economic growth produces a growing proletariat

increases in labor productivity→ increases in the industrial reserve army

what is a necessary component for the law of capitalist accumulation?

surplus labor population

what are the implications of the industrial reserve army?

people can easily be replaced and therefore do not hold much power in the labor market, leading to lower wages and less job security for workers

balance of power tilts in favor of the capitalists

____ _______ is necessary for growing economic prosperity

chronic unemployment

________ is not an exception, it is a necessity of capitalism and continual economic growth

poverty

how does capitalism affect agriculture?

eliminates the peasantry and replaces it with waged labor