4.1 Inherent conflicts within the capitalist production system

Marxist political economy (MPE) focuses on class as its unit of analysis (contrary to neoclassical economics which focuses on individual consumers and firms) and is critical of how national income is generated in capitalist societies more generally.

Marx’s (1867) Labour Theory of Value provides us with an interesting and useful explanation for the entrenched economic and social inequalities that we discussed earlier. While a majority of workers under contemporary capitalism enter into wage employment contracts that oblige them to provide their time and skills (their labour power) to a firm to produce goods and services for a market where a profit can be realised, rarely is the salary they earn as high as the actual value they create: according to MPE, the value of a commodity is not the price you pay for it on a market, but the socially necessary labour time to produce it (Fine and Saad-Filho, 2016).

Nonetheless, the creation of surplus value in itself does not yet result in economic growth in the classical account of MPE – capitalists could just use the profits that workers have generated from them and save them or spend the extra money on fancy restaurants and nice holidays. This is where the second conflict inherent to capitalism comes in: the conflict amongst capitalists. One way for capitalists to ‘outcompete’ another capitalist is for them to lower workers’ wages as labour costs are commonly a significant cost burden for business owners (thus to increase the rate of exploitation of workers). Another way is to invest into the development of new technology and innovative production processes that will make their business more productive. By investing in new and better machines, technologies and production processes, a capitalist can increase the productivity of their workforce. Thus, what ultimately drives economic growth is the extra capital available to the capitalist to invest in better technology to expand production.

Activity 5: The capitalist production process according to Marxist Political Economy

Timing: 15 minutes

Watch this short clip and then have a go at answering the questions that follow.

Select the answer for

Question 1a

here

Download this video clip.Video player: Video 1: A Marxist Perspective on capitalist production

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Transcript: Video 1: A Marxist Perspective on capitalist production

[Text on screen: Owning the Means of Production]

NARRATOR:

You depend on material conditions to survive. This is stuff made out of things, like food, clothing and shelter. You also depend on what is needed to make these things, like land, farming tools, building tools, building materials, that kind of thing.

The first kind of thing is called the means of subsistence, and the second is called the means of production. This is important. Notice that if you have access to the sufficient means of production, you can produce some of your own means of subsistence. But having the means of subsistence does not allow you to produce anything if you have no access to means of production.

Here is a central characteristic of capitalism. People can own the means of production. All this really means is that other people either aren’t allowed to use it or must use it on the owner’s terms. So if you don’t own any means of production, you must arrange a deal that is satisfying to someone who does in order to get your means of subsistence and thus survive.

[Text on screen: Appropriation of Surplus Value]

Pardon me for assuming, but I imagine that you want means of subsistence so that you can survive. Let’s also further imagine that you don’t own the means of production. And let’s say that some fine lad comes to you and says, ‘I’m a capitalist, which means that I own the means of production and I pay others to operate it. You can use what I pay you to purchase means of subsistence and it will all be hunky-dory.’ Let’s say you accept and work the means of production all day, using your labour to create things with use value, thus creating new exchange value. The capitalist takes everything you produce and gives you some money, which represents much less than the exchange value you produced. This is enough for your means of subsistence for the day, but no more. I guess you’ll have to come work tomorrow too.

As the weeks go by and you continue to work for the capitalist, the capitalist continues to accumulate the value you produce. Some of this he uses for maintenance, keeping the means of production in good working order. Some is used to get the raw materials used in production. The rest is either used to scale up and get more means of production or for his own means of subsistence and personal luxuries. This last bit here is known as surplus value, which is important.

Here is a fascinating question. If you, the worker, are doing the actual productive labour and the capitalist is not, why does the surplus value go to him and not to you? Wouldn’t it be more fair for you to have it, as you’re the one doing the actual work? After all, since your wages are only covering your means of subsistence, your only choices are to continue working for the capitalists or starve. Therefore, under Marxism, the capitalist profiting, that is, taking the surplus value generated by workers, is considered exploitation.

End transcript: Video 1: A Marxist Perspective on capitalist production

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Video 1: A Marxist Perspective on capitalist production

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Choose the description that is accurate according to MPE:

1. Capitalist

Own the means of production, such as a firm, machinery, or software.

Manage a team in a firm.

 

a. 

Own the means of production, such as a firm, machinery, or software.

b. 

Manage a team in a firm.

The correct answer is a.

Select the answer for

Question 1b

here

2. Workers

Sell their labour power to the capitalist and rely on a wage for survival.

Pursue single activities and sell the end product to the capitalist.

 

a. 

Sell their labour power to the capitalist and rely on a wage for survival.

b. 

Pursue single activities and sell the end product to the capitalist.

The correct answer is a.

Select the answer for

Question 1c

here

3. Necessary labour time

8-hour workday.

Proportion of the working day that workers need to work in order for the capitalist to make enough money to cover their wages.

 

a. 

8-hour workday.

b. 

Proportion of the working day that workers need to work in order for the capitalist to make enough money to cover their wages.

The correct answer is b.

Select the answer for

Question 1d

here

4.Surplus labour time

Time at work during which the worker rests.

Time during which the worker does not work for themselves but works to produce a profit.

 

a. 

Time at work during which the worker rests.

b. 

Time during which the worker does not work for themselves but works to produce a profit.

The correct answer is b.

5. Figure 8 illustrates how economic production is organised in a capitalist production system according to Marxist Political Economy. Why is capitalism an exploitative system according to MPE?

Maximise

Figure 8: Economic production in a capitalist production system according to MPE

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The figure shows economic production in a capitalist production system according to Marxist political economy. On the left-top of the figure there is a graphic of an industrial firm labelled ‘capitalist’. From the graphic, there is a black arrow labelled ‘owns’ pointing rightwards to a box which says ‘means of production’. On the top-right of the figure there is a graphic of three construction workers wearing helmets labelled workers. From the graphic, there is a black arrow labelled ‘own’ pointing leftwards to a box which says ‘labour power’. The two boxes in the top-middle of the figure are labelled with ‘Inputs, raw materials” written into a yellow box. Below these boxes and graphics, in the middle of the figure, there is a large white box with a green frame and a green label on top saying ‘Production process: workers perform labour’. In the middle of the white box there is a large blue arrow. The top of the arrow is light-blue and has ‘necessary labour time’ written into it; the lower part of the arrow is dark-blue and has ‘surplus labour time’ written into it. On the right side, next to the section of the arrow that is light blue is a red box labelled wages. The red box has an upward pointing arrow towards the workers graphic on the right top of the figure. On the left side, next to the section of the arrow that is dark blue is a red box labelled profits. The red box has an upward-pointing arrow towards the capitalist graphic on the left top of the figure. Below the large white box with the green frame is another yellow box saying ‘Commodities’. The blue arrow points towards the yellow box at the bottom.

Figure 8: Economic production in a capitalist production system according to MPE

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Answer

According to MPE, capitalism is exploitative because capitalists extract surplus value from workers by paying them less than the value they produce, appropriating the difference as profit. Exploitation is hence understood as the act of capitalists forcing workers to sell their labour power for less than the full value of the products they produce. Capitalism relies on this unequal relationship, where workers have little control over the means of production.