Many people would ask me about my name. There are two versions- both accurate- but depending on my mood, I will tell one or the other. The version that concerns today’s post answers the question “what was my parents’ inspiration?” to choose such name for their firstborn.
Most wouldn’t be able to guess because honestly I don’t give any vibe or any clue about it. But a friend who recently reconnected with me was able to! Jamaica (now that is a beautiful name, don’t you think?), a former Political Science student from the University of the Philippines was unbelieving when she inquired whether I was truly named after mathematician and philosopher- the owner of one of the most magnificent brains ever to have analyzed facts- Karl Marx.
A big shout out to my friend Jam, for giving me that unique “high”! Nobody really thinks of identifying me with Herr Marx when they see me…
During freshman in college, I was 100% sure that I’d shift to another course as soon as the year ends. I simply wasn’t “feeling” B.S. Economics and felt it was not for me (where B.S. started to not mean Bachelor of Science). The first semester only convinced me that I didn’t even want to learn how to think like them Microeconomists or Macroeconomists.
Come second semester, and I entered into this class “International Economics I”. I sat down in the fourth row, prepared to take notes, poised to comfortably listen to whatever monologue the professor had to say. To my surprise, he asked the whole classroom, “What do you think is the biggest problem of the world today?” Many people said, “Poverty”, “Hunger”, “Inequality”. When my turn came I said, “American imperialism”. Huh. The class suddenly went silent, all eyes turned on me and there were a few uncomfortable chuckles. The professor smiled and proceeded to listen to the rest of the class’ opinions.
It turned out that the professor is a hard-core Marxist. In fact, he complied with the class curriculum using a purely Marxist analysis of international economics. My eyes have never been so widely opened as that time. It was that class, that professor and the alternate way to analyze the economy that made me want to finish the degree.
I don’t claim to be a Marxist, because truth be told Marxism is a lifestyle.*
What I do claim though, is that I am content understanding how things stand- knowing where I stand. I am satisfied knowing that I possess the tools with which to counterbalance any information fed to me; and that there is another way to see, think, analyze and to react.
On Poverty and Inequality
The standard lesson taught to me and my peers since childhood is that poverty is “bad”, “unfair” and “must be defeated”. Along these lines, the subject of inequality would arise while wistful looks and stares could be caught among students. Needless to say, I grew up believing that poverty can be defeated and that inequality could be eradicated.
However as a grown-up, Professor Arrizabalo turned my head towards another reality (some of my peers were also able to do so, others were too busy surviving to see) and made me see that in a capitalist system- yes, the one we are thriving in- poverty and inequality are necessary conditions for the system to operate. And it all starts with the everyday task of going to work.
A Toxic Relationship
Perhaps the most applicable lesson from Marx in the 21st century are his reflections on the relationship between the Capitalists and the Workers.
In a very summed-up description: the Capitalist possesses the means of production and hires the Worker to transform them to goods (and services) to be traded. During the production process, the Capitalist incurs in production costs consisting of procuring materials and the Worker’s labor (whose cost is the wage). However, this wage does not equal the value of the good or service Worker has produced; it is less, although in principle it is enough for his maintenance and the perpetuation of other Workers (minimum wages).
Technically, the wage is paid according to a day’s work. Let us suppose that it takes 6 hours to produce a certain good (or service) whose price is equivalent to the Worker’s minimum wage. In this case, the Capitalist will pay what is due to the Worker, will sell the product and will receive the same amount he has spent to produce it. Profit is something unheard of in this case.
Logic says that if this were to be true, there would be no incentive for the Capitalist to enter (and preserve) this kind of relationship.
Therefore, the Capitalist extends the working hours of the Worker to 6 hours more (12 hours in total) in such a way that the value of the finished product is that of 12 hours’ work. However, the Worker does not receive the amount equivalent to the extension of working hours. At the end of the day, he will still be paid what was 6 hours’ worth of wages. With this method, the Capitalist will be able to sell a product with higher value without having to pay for the said increment. In fact, he gets to keep that increment for himself.
“Let us assume that these means of subsistence represent six hours of labour-time daily. Our incipient capitalist, who… hires a labourer, consequently pays this labourer the full value of his day’s labour-power if he pays him a sum of money which also represents six hours of labour. And as soon as the labourer has worked six hours in the employment of the incipient capitalist, he has fully reimbursed the latter for his outlay… But so far the money would not have been converted into capital, it would not have produced any surplus-value… The fact that only six hours’ labour is necessary to keep the labourer alive for twenty-four hours, does not in any way prevent him from working twelve hours out of the twenty-four. The value of the labour-power, and the value which that labour-power creates in the labour-process, are two different magnitudes. The owner of the money has paid the value of a day’s labour-power; his, therefore, is the use of it for a day — a whole day’s labour…
On our assumption, therefore, the labourer each day costs the owner of money the value of the product of six hours’ labour, but he hands over to him each day the value of the product of twelve hours’ labour. The difference in favour of the owner of the money is six hours of unpaid surplus-labour, a surplus-product for which he does not pay and in which six hours’ labour is embodied. The trick has been performed. Surplus-value has been produced; money has been converted into capital.”
– Anti-Dühring by Frederick Engels 1877
The remaining value- that is, the difference between the newly-incremented value of merchandise created by the worker minus his wage is the Surplus Value. Once the product is out in the market at a given price, such price minus the cost of materials minus wages is what we know as Profit.
In a few words: there is the Capitalist’s need to develop Capital through Profits and the Worker’s requirement for Wages to sustain himself by the sale of his Labor (labor power) for as long as he lives.
It is easy to sense that the above-mentioned relationship is not one between equals. A short and simplified analysis could help figure this out:
(1) Price of a product = cost of materials + wages + profit
27 = 21 + 3 + 3
Should we follow the above assumption regarding the number hours’ labor:
(Where 1 day of labor= 3 units of wage)
Price of a product= 27 units
cost of materials= 21 units
wages= 3 units
profit= 3 units
We have said that it is the acquisition of profit which motivates the Capitalists to enter in a transaction with the Worker, so we will simply transform the equation for an easier viewing (by subtracting cost of raw materials and wages on both sides of the equation):
(2) Profit = Price of a product – cost of materials – wages
3 = 27 – 1 – 3
In this new equation, it’s easier to see how Profits are inversely related to Wages. Wherein, an increase in Wages would undoubtedly mean a decrease in Profits.
Now it is clearer where the interest of the Capitalist lies, and that is to increase profits as much as possible. More particularly, the system requires an ongoing and never-ceasing increase of the capital’s growth rate in detriment of the workers’ salaries (wages). This case satisfies the condition of inequality.
At the same time, this naturally creates and aggravates situations of poverty. In many industries (like in textile, hardware assembly or certain services) capitalists are capable of localizing and hiring the lowest-paid workers to maximize their profits. On one hand, some workers lose their jobs because of this change; on the other hand the newly hired workers become the fresh army of laborers to be exploited. Yet even then, capitalists will still find ways to squeeze workers of their meager earnings.
Image courtesy of: http://thedailyjournalist.com
The Few Who are Them and the Many Who are Us
The world is full of wonders, but one of its greatest oddities could be the fact that the capitalists who are so few in relation to the workers, have become so powerful.
If we consider the Fortune 500 list, we come to the conclusion that there are only 500 of them in the whole planet, and around 7,461,087,270** of the rest of us. Roughly 500 people hold in their hands the means of production with which they convince the rest of us that we can prosper and progress not only for ourselves but for the generations that would come after us. How did this come to be?
An explanation we could all relate to is that capitalists are able to maintain their power because the workers lack unity among themselves. Such division has been made possible through competition. Just as the capitalist is in competition with the worker due to their opposing interests (profit acquisition versus raise in wages), so are the different types of workers placed face to face one another, defending their varied interests.
Competition also brings about inequality within the ranks of the working class, likewise generating and exacerbating poverty in both its absolute and relative terms.***
Try to remember how specializations in different areas of work have surged in the past decades:
- There are not only engineering courses, but also technical ones which offer a more practical approach to a subject.
- Within engineering courses: computer engineering and financial engineering have sprouted as new necessary courses
- There are not only Economists but Business Administration graduates, Business Analysts, specialists in Actuary sciences, and so forth…
- The outsourcing of certain services (accounting, legal, debt collection, client service, invoicing, data mining, etc…) by big companies to find the most cost-effective formula.
- … and many others.
The specialization of the working class (referred to in Economics as the “division of labor”) obviously hones different sorts of talents and capabilities according to a specific area of concentration. As a consequence of having unique skills and capacities, salaries also differ not only when comparing one area to another (for instance, informatics versus tourism); but even in the same industry salaries widely vary across levels and niches (like in the financial industry).
As we are but humans, our interests lie in the continuous betterment of our own situation and in maintaining the attained status. We do this not only for us, but for our children and our children’s children. This is why we find it hard to break away from the chains (some of them golden, some of them platinum) of capital. Because honestly, what could we do?
Additionally, it must be added that the power of the capitalists was the result of a historical and social affirmation of their political standing. It took some time, but the capitalists have finally secured its position as the ruling class and it doesn’t seem to be willing to relinquish the title any time soon.
The Communist Manifesto states, ” The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations.” Such an end signified the beginning of their conquest for control and power.
The “constant revolutionizing of production” (before through machinery and in modern times through information), the continuous market expansion and the discovery of cheaper sources of raw materials (through better transport systems)… these undertakings were accompanied by the possession and centralization of means of production, markets and territories which have aided the capitalists to establish themselves as well as their principles and their values in the four corners of the world. This is how we have adopted the capitalist mode of production; not only “we” as in those who constitute the society, but also “we” as those who take part in politics and policies.
And so it goes, “Each step in the development of the bourgeoisie (capitalist class) was accompanied by a corresponding political advance of that class… The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.”
Now returning to the previous question, it may be better to be straightforward and argue that so few capitalists hold so much power because so many (if not all of us) have come to depend on them. Accordingly, this dependency can be projected towards international relations where poorer countries depend on the rich ones for their livelihood, for “protection” and even for “aid”.
Image courtesy of: http://quotesgram.com
In my university, Marx was considered as belonging to the heterodox school of thought. His ideas were so unorthodox that if anybody wanted to learn his method of analysis, either they would have to get lucky to have a Marxist teacher or choose the elective subject entitled “Marxist Analysis of the Global Economy”. If a supposedly progressive institution marginalized such breakthrough in Socio-Historic-Economic analysis, it would be effortless to imagine how the rest of the society reacts before such an idea (with fingers crossed, perhaps after more than 10 years the curriculum has changed and has paved way for diversity).
Writer L. Genova said that “Reality depends on perspective, on what is paid attention to”. In the case of Marx, he paid close attention to the human beings and their development. Better said, he probed on the factors causing hindrance to human development under the capitalistic regime. His theories are far from being axioms, but they are part of the universe of realities in the domain of Economics as experienced by its main characters- the human beings.
As of the moment, we may not be witnessing the revolution that the Communist Manifesto has called out for. However, we have been granted a lens through which we could see the world differently. Hopefully, we could use this new vision to gradually move forward with better understanding and a greater awareness of the consequences laid before us.
Image courtesy of: https://twitter.com/openmindschool
*Did you know that Marxists speak differently? I believe that in their aim to change/revolutionize the society, they have turned their backs to the standard language because (and this is a personal view) even the historical evolution of the modern language has led to this capitalist society. Therefore, all those who wish to participate in the revolution, would have to change their way of living including the way they speak.
**Actual data at the time of writing.
***Absolute poverty is determined according to a poverty threshold. That is, the minimum amount of resources (typically income) needed for a person to survive. Relative poverty on the other hand places the subject (the poor) within the social, cultural, political and economic context of his habitat. The best example for this is when we say that to be poor in Amsterdam is not the same as being poor in New Delhi.
Capitalists (Bourgeois)- The class… who in all advanced countries are in almost exclusive possession of the means of subsistence and those means (machines, factories, workshops, etc.) by which these means of subsistence are produced.
Profit- The difference between: the price at which a product has been sold minus the costs with which the product has been generated.
Worker- The class of the completely propertyless, who are compelled to sell their labour to the first class, the bourgeois, simply to obtain from them in return their means of subsistence. Since the parties to this trading in labour are not equal, but the bourgeois have the advantage, the propertyless must submit to the bad conditions laid down by the bourgeois.
Labor- the commodity sold by the Worker to the Capitalist in exchange for a wage
Wage- the amount of money which the capitalist pays for a certain period of work or for a certain amount of work. In short, this is the price of labor (or labor-power).
- “The Relevance of Marxism Today: Interview with Michael A. Lebowitz”, by Zhuo Mingliang, MR Zine, available at: http://mrzine.monthlyreview.org/2013/lebowitz210313.html