Accumulation of the Wealth: an Analysis through Marxist Perspective
Marx's Capital; a Bible of Working Class
Capital is an in-depth analysis of Capital written by Karl Marx and edited by Fedrick Engles. Marx wrote this as a Critique of Political Economy. It is divided in four volumes, as following.
Volume one discusses 'The Process of Production of Capital'.
Volume two is about 'The Process of Circulation of Capital'.
Three discusses 'The Process of Capitalist Production as a Whole'.
Fourth is 'The Theories of Surplus Values'.
Marx's Capital is known as a bible of working class.
This artcle is a summary of all four volumes written to encourage readers for in-depth study.
What is a Product?
The product is an item produced for sale. It is also called Commodity. It has use value as well as an exchange value. When an item produced for personal use, it holds only use value but does not hold exchange value. While, when a product produced for sale, it holds both; use value as well as exchange value.
Raw Materials and Processed Material
Raw material is a substance which is availble in nature. These are in their natural forms, such as air in the atmosphere, water from river or sea water. Materials which hold labour, called processed materials i.e. cotton and bricks.
Thus, natural raw material does not hold any exchange value, despite it is useful. For example, air is useful for a life for inhaling and exhaling. Though, it does not have any exchange value, because there isn't any market value.
Cotton is not a natural raw material because it involves human labour. It is an end product that is the result of farming. In modern terms, it is known as, a processed Material or input material. It is Input material for a weaver for process of weaving to produce cloth as an Output. But this is a product or OUTPUT material for a farmer. Here, Cotton contains both use value as well as exchange value.
In short, Natural raw Material only consists use value. While, Processed material contains both use value and exchange value.
What is Labor?
Each process transforms Input material into Output material. Means, raw material transforms into a product by labor. This labor is being measured in time, and time is in Hour.
Every product involves some labor varied in time, called labor time. So, there isn't a product without labor-time. Labor creates a product value and it is being calculated in labor-hour. Longer the labor-Hour added in a product, higher is the value of a product.
For example, Two similar Sikles arrive for sale in the market. The market decides correct prices, which are equal in value. Despite, one blacksmith has taken the longer time to produce compare to other.
The market is a place to decide the correct value of sickle, on the basis of labour needed to produce. This labor is average necessary social labor to produce the sickle or any product. Thus, the value of product represents its average social labor.
Commodity and its Movement
The commodity is a product produced for exchange. In a commodity economy, one product is exchanged with another product. For example, a cobbler produces a pair of shoes and baker produces bread. They exchange their products; a shoe maker buys bread in exchange for a pair of shoes. Here, both the products are exchanged for their personal use. The move starts from Commodity (C), which is exchanged with Money (M) and again ends at Commodity (C). The formula here is C -M -C.
But in a capitalist economy, capitalist buys shoes from the cobbler in exchange of money and sell this shoes in exchange for money. In this move, Capitalist buys shoes, not for his personal use but to sell and earn the profit. Here, the move starts from Money (M) which is exchanged with Commodity (C) and again ends at Money (M). The formula here is M - C- M.
What is Profit?
In a capitalist economy, profit is earnings or an increase in money. This is a result of an activity either of production or trading. To earn profit or accumulate a wealth is legalized by law in a capitalist economy.
Capitalism allows capitalist to accumulate capital for the sake of profit. Capitalist earns profit through production or trading activities. We will use following two formulas, to understand the process of capital accumulation.
Accumulation via Production
As seen above, raw material R does not hold any value if it is in natural form. i.e., water at the river or sea. Here, the value of Raw material is zero, means R=0.
Now if we add some labor L in hour H, then we will have L x H or LH.
If we add LH Labor-hour in Raw material R, then our formula for value is; R+LH=value.
But as we know, R has a zero value, as it doesn't hold any labor time (LH).
So, R+LH=V becomes 0+LH= V, means LH=V.
That means, Value created in production is nothing but mere labour-hour LH.
So, How capitalist does earn his profit?
Here, he pays Wage W to his labours against their labors LH. That becomes W= LH.
That means, above formula R+LH=V now turned to W=V.
Means, Wages = Value.
But, if capitalist pays full value V as wages W, then how does he earn profit?
To make this formula works for him, capitalist underpays the wages W lesser than actual value V. The hidden or saved amount is known as Surplus Value (SV).
That means, correct formula is R + LH = V = W + SV
This surplus value is a part of Labours, in reality turns into a wealth of Capitalist.
Accumulation via Trade
Capitalist as trader buys the product commodity (C) in exchange for some money (M), for example, M1. He again sells bought the commodity (C) in exchange for some money, here M2. The value of M2 is higher than M1.
In every exchange products are being exchanged with equal value. So, the equation seems to be M1=C=M2. Yet, in this move traders earns a profit. So, the equation in reality works as M1<C<M2.
This is how traders earn their profit through trading. They put the lesser amount at the beginning of each move and withdraw bigger than invested. Through the circulation of money, traders accumulate wealth. More they circulate, more do they earn.
Thus, the move M -C -M becomes a way of wealth accumulation in capitalist economic. While the move C -M -C works for real exchange in a commodity economy, where no one does accumulate any wealth.
As seen in both the cases, capitalist as an Industrialist or as a trader accumulates wealth.
To make this happen, capitalism already has pre-arranged everything works for them. i.e The government, bureaucracy, legislation, judiciary as well as democracy.
That is why Karl Marx claimed that capitalism is digging its own grave and will once collapse.