Marxism Explained (where does profit come from?)

G_Haile12 · #1 (**permalink**) 06-18-2008, 04:16 PM

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This will be my first in a series of videos meant to explain Marxism to ordinary people in an understandable fashion, and also to give a Marxist economical analysis of capitalist society.

Imagine you are a capitalist. Your money works for you. You wake up in the morning with a big chunk of cash. You invest that cash in some productive capital. At the end of the day you have more cash than you started with. All you did was sit around and drink martinis.
The money you invest moves through space to distant lands, far away, where people you will never meet scurry around on shop floors, assembling widgets which your salespeople will sell to make your profit. You don't know them. You don't care to. After all people are just factors of production... like machines, like raw materials. The cheaper the better.
Out in the world are other capitalists. Unlike workers, they are worth worrying about. For it is these other capitalists that are competing with you for your profit. They compete to outsell you in the market for your commodities. They compete to command cheaper inputs than you. Whenever you aren't chasing after more profit, someone else is. When you meet in the marketplace, they will beat you.
Imagine you are money.
In the morning you start out as a wad of bills in a capitalist's wallet. The capitalist uses you to pay rent for factories, pay wages to workers and to buy raw materials.
Now you are no longer money. You are factories, wages and raw materials. You are productive capital.
Workers hammer on you, smoke comes out of your smokestacks. Your conveyor belts rattle with the magic of creation and.... abracadabra: you are commodities. The production process turns that productive capital into commodities.
As commodities you sit around on shelves. Eventually workers come along and buy you. They pay for you with money. Now you are money again. But this time you are MORE money! We call this circle the "circuit of capital".
Have you ever seen the movie "The Blob"? It's a corny 50's horror movie about this alien monster that looks mysteriously like a large wad of bread dough. It gets bigger and bigger until it takes over the whole town. This is kind of like capital.
Let's go back to pretending we are capitalists...
Capital expands and expands and expands through this circuit of money-commodities-money. (MCM) Capitalists have two choices: either continually reinvest their profits into this circuit of capital, or be destroyed by other capitalists who do.
Let's say you decided you were tired of constantly competing for more profit, constantly searching out ways to lower production costs. Let's say you decided just to keep your production at the level it is. What would happen? Pretty soon other capitalists would have found cheaper inputs, and more efficient ways to produce commodities and they would be outselling you in the marketplace. And pretty soon nobody would want to buy your commodities and you would be out of business.
So capitalists may be greedy. They may be immoral. They may be scum. But capitalism is not greedy, immoral or scummy because of greedy, immoral scumbags. Capitalism is greedy, immoral and scummy because it compels people to be greedy, immoral and scummy. It compels people to compete against each other in a constant quest for more profit, for cheaper production costs. It compels capitalists to stop at nothing to turn their money into more money. Capitalists will pillage the earth, wage wars, buy off governments, destroy peoples' lives all in order to change money into commodities and then back into money.
So maybe money isn't really working for capitalists after all... maybe capitalists are really working for money. One sometimes wonders if there is any limit to what the imperatives of profit will make people do.
But where does this profit come from...?
Money goes into the production process and comes out as commodities which exchange for a greater amount of money. Huh? Is it magic? This makes no sense without recourse to the theory of value.
Let's review that theory for a moment. For all of these different commodities to exchange in the market they must have a common substance. This common substance which allows us to treat all commodities as containing differing portions of the same substance is labor. Labor produces value. All commodities are the products of labor. Their value is determined by how much labor went into them. Labor digs raw materials out of the ground, labor turns raw materials into useful objects (use values), and labor transports commodities all over the world to be consumed. Labor is what makes our economy tick. It is the substance behind everything we consume and all of the objects we interact with. Labor is to the economy what the atom is to chemistry.

G_Haile12 · #2 (**permalink**) 06-18-2008, 04:17 PM

<<<MOD EDIT: These words and ideas are the intellectual property of another person. Videos of his presentations can be found here: Youtube Transcripts can be found here: Wordpress Please cite your sources. Don't take credit for ideas that don't belong to you. Don't put the site in jeopardy through copyright infringement. Don't surrender your integrity. CITE YOUR SOURCES.>>>

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They are buying "labor power", that is, the capacity of the worker to do labor.

But capitalists have a lot of control over how much labor they get out of workers. In fact, capitalists (or the mangers who work for them) devote a great deal of time to streamlining production so that each worker produces as many commodities as possible. They do this by reorganizing production and by employing labor-saving technology.

As well as making workers more productive, capitalists also seek to spend as little money on their workers as possible. By spending less on workers capitalists extract more value per dollar invested. This is not true of other productive capital. If a capitalist spends less on coal, he gets less coal. If he spends less on the factory he gets a crappy factory. But when capitalists spend less on labor they don't necessarily get less work out of their workers.

There are many ways in which capitalists spend less on labor. They pay lower wages, pay less to train workers, pay less for safety, pay less for insurance. It is important to realize that high wages, worker safety regulations, employer-paid health insurance and pensions are all things that run counter to the basic incentives of capitalist accumulation. We have all those things because workers organized and fought for them decades ago. And capitalists are constantly trying to take those gains away from us. You don't need me to give you examples of this. Pick up the newspaper.

So labor is "variable"- the amount of value it produces is up in the air. The capitalist constantly tries to get more out the labor-power it buys even if this means subjecting workers to increasing degradation. If the labor power produces more value than the capitalist spent on it then profit has been created.

We have another word for this process in which workers create more value for capitalists than they are paid for: Exploitation.

Exploitation is essential for capitalism. It is the only source of profit. Without profit money cannot be turned into more money and we have no circuit of capital. Without a circuit of capital we have no way of turning raw materials into commodities. Nothing can be produced or exchanged. There is no capitalism without exploitation.

Like most truths in our economy, exploitation lies hidden deep within the inner reality of the movement of capital. Though we all experience exploitation, few of us are conscious of the fact. A worker is paid to do 8 hours of work and they do 8 hours of work. There may be some dim conception that something isn't fair about the large salary of the CEO compared to the worker's own paltry salary. There may be grumbling about how hard and miserable the work is. But workers can't see the exploitation. They don't see a capitalist taking anything away from them. The wage contract obscures the reality of exploitation from their view.

The capitalist is aware that profit depends on worker productivity. The capitalist is aware that paying workers less, organizing production efficiently and using labor-saving technology are all ways of increasing profits and staying competitive. But the explicit nature of exploitation is obscured to the capitalist as well. To the capitalist (and to bourgeois economy in general) labor is one of many inputs into the production process, all of which need to be economized. Capitalist seek to cut all sorts of costs whether it be for raw materials or workers. So the reality of exploitation as the sole source of profit is obscured from the capitalist as well.

This obfuscation is something we will return to in future postings. It is the starting point for understanding many things about the way people consent to the cruelties of capitalism, the way in which the actions of individual capitalists have disastrous consequences for capitalists collectively, and the relation between value and price.

DanishDynamite · #3 (**permalink**) 06-18-2008, 04:31 PM

Yawn.

There are no "workers" anymore in advanced Capitalist countries. The fair distribution of wealth is perfectly possible within Capitalism. See Scandinavia.

It is the combination of the best of both worlds. Leave the free market alone to compete with others and hire and fire people easily as the situation may require. But have a fine-meshed social security net to catch anyone who falls.

Zapatista · #4 (**permalink**) 06-18-2008, 04:54 PM

I deny your assertation that there are no workers in an advanced capitalist country. They may have white-collar jobs, but they are still workers. And they are still exploited by the machine of capitalism.

And Scandinavia is not the ideal situation. There are still the rich and the poor. The welfare state is not ideal, it is simply a patch on the problems created by capitalism.

StarryStarrySkies · #5 (**permalink**) 06-18-2008, 05:00 PM

I have a whole lot of respect for Marx because he developed a new theory that gave way to more theories and better understandings of society but Marxism is unrealistic and idealistic. It just can't work. It can't work because socialism doesn't work. Norway and Sweden do well but that's not true, Marxist type socialism. And who knows if they, too, will fall. It's either capitalism or socialism and neither works. Unfortunately we need to find a working synthesis of the two but it's not definite that even something like that will never fall.

Zapatista · #6 (**permalink**) 06-18-2008, 05:24 PM

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Originally Posted by StarryStarrySkies

I have a whole lot of respect for Marx because he developed a new theory that gave way to more theories and better understandings of society but Marxism is unrealistic and idealistic. It just can't work. It can't work because socialism doesn't work. Norway and Sweden do well but that's not true, Marxist type socialism. And who knows if they, too, will fall. It's either capitalism or socialism and neither works. Unfortunately we need to find a working synthesis of the two but it's not definite that even something like that will never fall.

I vote collectivist anarchism. But thats just me.

Fear-And-Loathing · #7 (**permalink**) 06-18-2008, 05:40 PM

It's got to be Capitalism and Socialism because on their own they are imperfect.

White Fox · #8 (**permalink**) 06-18-2008, 05:44 PM

The blob of capital?

Humorous.

Besides that, there is no such thing as "wage slavery." Workers sell their labor entirely voluntarily. There is choice and freedom involved. You could always refuse to work for anyone and produce your own goods. If you were to argue that we are instead slaves to scarcity, then I would agree. But there is no way to avoid that, it is the way of the universe.

Zapatista · #9 (**permalink**) 06-18-2008, 05:45 PM

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Originally Posted by Fear-And-Loathing

It's got to be Capitalism and Socialism because on their own they are imperfect.

So, your point? How about we circumnavigate that problem of them being imperfect and go to the REAL system of government, collectivist anarchism. And no, that is not a contradiction of terms. You can have a non-hierarchial government.

@ White Fox: Yes, wage slavery does exist. To exist in a capitalist system, you must be paid a wage of some sort. Without capital, you are going to suffer in a capitalist system. therefore, we are beholden to the concept of the wage.

White Fox · #10 (**permalink**) 06-18-2008, 05:48 PM

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Originally Posted by Zapatista

So, your point? How about we circumnavigate that problem of them being imperfect and go to the REAL system of government, collectivist anarchism. And no, that is not a contradiction of terms. You can have a non-hierarchial government.

People won't be collectivist without someone forcing them to be.

Anything that forces them to be can be defined as "government" whether you like it or not.

When power is allocated to a group of people, it consolidates in those who have the most ambition.

Hierarchy forms as the ambitious rise in government.

In that way, there is no feasible way to have collectivist anarchism, it is either authoritarian collectivism or anarchy.

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