Economics 436, Fall 2012

1. Economics 436, Fall 2012 Marxian Economic Theory Paul Zarembka

2. Introduction • We will be demonstrating that capitalism is a system that exploits workers • We will provide a couple of examples of famous socialists you probably don’t realize • Capitalism is also a system which endangers life • We will concentrate on theory (as does most economic courses) but will also offer empirical evidence • Since Marx is obviously a talented human being still we will indicate just a bit of it to ‘humanize’ the person

3. Introduction to theory • Consider the meaning of “continents of knowledge” • Consider levels of abstraction in social theory, including economic, political and ideological instances • Contrast subjective versus objective • Contrast science versus humanism • Importance for human life of production

4. Major concepts within Production • Means of production • Social relations of production • Productive forces • Classes • Class struggle

5. Concept: Mode of Production • Throughout this semester we will need to introduce scientific concepts, similar to ‘gravity’ being a scientific concept. • The production and reproduction of human life is basic to our understanding. However, how it is undertaken changes over time; there is no rule which tells us how many historical divisions to describe. • We refer to these different manners of production and reproduction of human life as “modes of production”. • Each “mode” includes means of production, social relations of production (classes), and productive forces. It will also include politics and ideology because we are not merely focusing on the economy. Instead, the economy is basic.

6. “Theses on Feuerbach” • Thesis I: (see text) • Thesis II: The question whether objective truth can be attributed to human thinking is not a question of theory but is a practical question. • Thesis III: The materialist doctrine that men are products of circumstances and upbringing, and that, therefore, changed men are products of changed circumstances and changed upbringing, forgets that it is men who change circumstances and that the educator must himself be educated. • Thesis XI: Philosophers have hitherto only interpreted the world in various ways; the point is to change it.

7. “Communist Manifesto” • Before we move into the theory of the capitalist mode of production, we consider one of the most famous pamphlets of all time. • Actually, a person is not well-educated if she or he is in ignorance of this 1848 work by Marx and Engels. • We will focus attention upon Section I and then the end of Section II which represents a platform for action at that time, some aspects of which may surprise you.

8. Some modes of production • “Primitive” communist mode of production • Slave mode of production • Feudal mode of production • Capitalist mode of production • “Advanced” communist mode of production (this is not the same as “socialism”)

9. “Method of Political Economy” • This material is from notebooks that Marx wrote in 1857-58 as he begins to organize his life’s work. I focus upon selected passages from pp. 236-237, 241, 243, and 244 in the Tucker book.

10. Marx’s “Value, Price and Profit” • “Value, Price and Profit, is an introduction to his theoretical work that Marx presented in English in 1865, two year’s before Volume 1 of Capital. It is a very good starting point to understand Marx and you should read it carefully. It is linked on-line.

11. “Primitive” Communist Mode of Production • Who controls means of production? • Maybe up to 3500 B.C. in S.E. Asia and 1500 B.C. in the Americas • Marshall Sahlins, Stone Age Economics, wants scarce, means plentiful (reverse of Economics 181/182) • Development of productive forces?

12. Slave Mode of Production • Basic class relation: Slave/citizens • Who controls what? • Citizens separated from production, detest work and glorify “culture” • In Mediterranean, transport costs low • Independent artisans • Modern economic categories cannot be translated back. • Development of productive forces?

13. Feudal Mode of Production • Basic class relation: lord/serf • Who controls what? • Serfs work land on the manor, in return for offering labor, rents or customary dues • Merchants in towns and some products exchanged with lords for money • However, money not basic (important contrast to capitalism) • Development of productive forces?

14. Disintegration of the Feudal Mode and Rise of Capitalist Mode of Production • Factors centering upon productive forces • Factors centering upon social relations • Enclosure movement • Introduction of “simple commodity economy” – various methods used historically • Separation of handicrafts from agriculture (cotton textiles)

15. Basic Concepts • Labor and labor power • Value • Value of labor power (use value and exchange value of labor power) • Necessary labor time; variable capital • Surplus value • Constant capital • Rate of surplus value; rate of exploitation

16. Two Fundamental Concepts • Production of Absolute Surplus Value (pp. 344-376) A --------B -------- C to A --------B --------------C’ • Production of Relative Surplus Value (pp. 376-419) A --------B -------- C to A -----B’ ---------- C

17. Outline of Capital, Volume 1 Before our next step, we consider the outline of the full Volume 1: • Part I: Commodities and Money (111 pp.) • Part II: The Transformation of Money into Capital (31 pp.) • Part III: The Production of Absolute Surplus Value (135 pp.) • Part IV: The Production of Relative Surplus Value (195 pp.) • Part V: The Production of Absolute and Relative Surplus Value (28 pp.) • Part VI: Wages (29 pp.) • Part VII: The Accumulation of Capital (134 pp.) • Part VIII: The So-Called Primitive Accumulation (62 pp.)

18. Third method for increasing Surplus Value: Part VII of Capital, “The Accumulation of Capital” • Simple Reproduction (Chapter XXIII in Marx, but not reproduced in Tucker.) • Conversion of Surplus-Value into Capital (Chapter XXIV in Marx, but not reproduced in Tucker.) • The General Law of Capitalist Accumulation (Tucker’s p. 419 has *** before Chapter XXV without mentioning the two prior chapters.)

19. Marx’s Chapter on “General Law of Capitalist Accumulation” • 1. The Increased Demand for Labor-Power that Accompanies Accumulation, the Composition of Capital Remaining the Same • 2. Relative Diminution of the Variable Part of Capital Simultaneously with the Progress of Accumulation and of the Concentration that Accompanies it • 3. Progressive Production of a Relative Surplus-Population or Industrial Reserve Army • 4. Different Forms of the Relative Surplus Population. The General Law of Capitalist Accumulation • 5. Illustrations of the General Law of Capitalist Accumulation

20. Due Friday, November 16 See the two-page sheet portraying Marx's schemes of reproduction and a simplification by Pannekoek. Your assignment is as follows: 1. Show the calculation on the second page for the third step in the process, including showing that sales from Department I match sales from Department II. 2. Provide the representation of what the fourth step is numerically, again indicating how the sales between the departments match. 3. What is the rate of increase in the numbers of laborers throughout each of these four steps? 4. Go to A Short History of US Capitalist at www.newhistory.org, click on download, go to Chapter 8, Table 5. First, calculate the compound growth rate between 1870 and 1920 for the number of wage-workers (you will have to decide for yourself whether to include the 'clerical' category, and so report in your paper). 5. (Now the most timing-consuming part of the project:) Through library research, extend that table from 1920 to 1935, then to 1950, and finally to 2000. Carefully, cite your sources. 6. From the data in '5', describe what you learn about accumulation of capital in the U.S. during this period.

21. The Problem of “Realization” and J.M. Keynes’s Theory • “Realization” is a new theortical concept in our course. So far, we have only discussed the production of surplus value (paying workers less in the time required to produce the goods they consume than the hours they must work). However, our theory does not end there because the capitalists must SELL what they direct workers to produce. To the extent that they fail to SELL or undersell they have not realized fully surplus value. • This problem is connected to Keynes’ theory which we discuss in class and relate to Marx’s theory.

22. Keynes’ Theory • Rarely are students asked to read Keynes; rather, a reinterpretation is offered. In this course we will not read Keynes, either, but will offer an interpretation intended to demonstrate what is wrong with (neo)-classical economic theory. • We will show how Keynes basically ‘started over’, by asking a different question. His work helps us understand the vulnerabilities of a capitalist economy that can lead to Depression. • For example, we will demonstrate the crucial role of expectations for Keynes. We will show how capitalists drive Depression, not workers. We will help you understand how macroeconomics arose out of Keynes’ work.

23. Unproductive Labor • Unproductive labor in Marx followed upon discussion by Adam Smith. Smith, opposing feudal lords, did not consider household servants (for example) as productive. But Smith did not have the concept of surplus value. • Marx says that wage-laborers (those who sell their labor power to capitalists) are not always productive of value and thus surplus value. We need to consider this carefully. • The implication is the surplus value may be used for accumulation of capital and luxury consumption of capitalists as we have already discussed, but may also be used for hiring workers to do something else. We will break these possibilities down into those without state intervention and those with. • This elaboration canbe used to elaborate on Keynes and be used to explain a major distinction between the time Marx was writing and the world of the 20th and 21th centuries.

24. Unproductive Labor and the 20th Century • Marx did not focus on unproductive labor for the 19th century, but we will consider the imperialists fighting for colonies, then • World War I • Depression • World War II • Cold War era, continuation of high unproductive labor, with rising s/v (data from Edward Wolff, as handed out in class)

25. Rate of Profit and its Tendency over Time • Rate of profit π in terms of labor time = s/c • π = s/c, although in Marx himself it is s/(c+v) – we will discuss why v is probably not important • Now, s/c = s/v ÷ c/v = s/v ÷ [c/(v+s) × (v+s)/v ] where we recall that c/v is the organic composition of capital • Let the technical value composition be k = c/(v+s) which is a more accurate description of technology • Therefore, π = s/c = s/v ÷ [ k × (1 + s/v) ] • If s/v is constant, π falls if krises. But the evidence we present suggests that k does not rise.

26. The Transformation Problem • This is a technical problem that Marx recognized in determining prices of commodities in the market usinglabor times required to produce them. • We study both transfer of values across industries and across countries, using numerical examples that are handed out.

27. Interest-bearing Capital and Merchant Capital • If C means commodity, M means money, and P means production, then we need to understand: • Simple Commodity Circulation: C – M – C • Money as Capital: M – C … P … C’ – M’ • Interest-bearing Capital: M – M’

28. Commodities • We now turn to the beginning of Marx’s Capital, consider several passages, and place them in the context. • We also study a chapter in a book by Garry Leech to understand better how commoditization occurs in regard to the pharmaceutical industry, focusing upon Africa.

29. Primitive Accumulation • We will discuss so-called “primitive accumulation” in class, citing Marx’s conception. • In addition, youare expected to familiarize yourself with my text material on primitive accumulation that is linked, as well as Perelman’s material that is also linked. It is somewhat advanced of this course but nevertheless, you need exposure to it.

30. Marxism and Politics • As we approach the end of this course, we turn to the political dimension of Marx’s thought. Basically, marxism argues that the state serves the interests of the dominant class, and in capitalist society that would of course be the capitalist class. • For example, does evidence show that 9-11 was done by Al Qaeda orinstead by internal U.S. actors? • For this course, I ask you to read some of Marx’s work on the Civil War in the U.S. so that you are exposed to how Marx himself understood why it happened and that he predicted the outcome before it occurred.

31. Marxism and Politics, cont. • I also ask you to read Marx’s study of the famous Paris Commune of 1871 to understand what the workers actually DID when the took power. And also to understand why they could not hold onto power. • Marx did NOT have a blueprint for what a socialist society would look like, but rather argued that that is for the workers to decide (not any “leader”: recall Eugene Debs in the course video: ‘if I could lead you out of the wilderness, I could also lead you back in!’ In other words, don’t depend upon leaders but upon yourselves.) • I have decided NOT to ask you to read the material on the Soviet Union and Cuba toward the very end of the course. We have run out of time.