Economic Theory

– Articles for Discussion, Workers’ Centre of CPC(M-L) –

Terms, Expressions and Words in Political Economy

The terms, expressions and words employed in political economy reflect an underlying analysis. Human-centred political economy puts the working class and work, and not capital, as the starting point and kernel of its analysis. The human-centred analysis is partisan to the working class and its struggle to transform the economic base in a new direction towards socialism and the elimination of the social relation capital and class privilege.

A problem of terms arises from the clash between the integrated and socialized character of modern production and the private ownership of competing parts of the economy. Terms currently employed in official political economy do not reflect the socialized economy but rather the bias of owners of capital. Abstracting absence within the capital-centred analysis reveals a lack of terms, expressions and words that properly describe the reality of monopoly capitalism and the central role of the working class in the modern economy and its determination to build the new.

For example, the use of the word “cost” to describe the contribution and claims of the human factor in producing and reproducing value distorts the modern economic reality. The word “cost” is also inappropriate to express the role of material inputs transferred from previous work into new product, and the claims of governments and moneylenders on added-value.

The word “cost” is just one example of how words are presently used to deform the economic analysis to serve the aim of owners of capital to maintain the status quo of class privilege, and poison the working class with outmoded thinking and theory. The word “cost” in particular has become a capital-centric minefield, so distorted it no longer has any connection with economic reality to the extent that any claim on value except that of owners of equity is routinely deemed a “cost.”

The “cost” to owners of equity includes the human factor at work and its claim on the value it produces and reproduces while working. Owners of equity also include in their accounts and quarterly reports the “cost” to them of material transferred-value of past work-time (machines and mined and partially refined raw material etc), the claims of owners of debt (interest) and those of governments (taxes and fees). This depiction distorts the claims, transfer and distribution of value during the production process and its realization. The aim of owners of capital is to marginalize the actual producers of value, the working class, and make the social relation capital the centre of all economic thinking and theory.

The working class is faced with the theoretical task of developing terms, expressions and words that properly reflect the modern economy and the central role of the human factor in the production of goods and services. The existing terminology putting capital at the centre was necessary in the nineteenth century to explain the political economy of capital in contrast to pre-capitalist economic formations, in particular feudal relations of production. Capital-centred theory was developed to meet the requirements of nascent capitalism and to overcome the ideological overburden of pre-capitalist theory. It is now outmoded, in need of renewal, and a drag on moving society forward.

As the working class matured and became capable as a social force to move society to socialism past the transitional economic formation of capitalism, it likewise became necessary to develop a new human-centred political economy. This was most evident with the victory of the 1917 socialist revolution in Russia, the first ever nation-building project led by the working class that sustained itself through a generation until losing the battle with the international alliance of monopoly capital and its sustained military, economic and cultural, especially ideological, assaults.

The working class now has vast experience from over one hundred years of class struggle with the global monopoly capitalist system. Workers and their allies are charged with the responsibility to develop their own independent thinking and theory consistent with the need of the working class to assume its central and leading political, economic, social and cultural, in particular ideological position in moving society forward to the new. A feature of this work is to develop terms, expressions and words that properly reflect the modern socialized economy.

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The Working Class, Not Capital,
Is the Centre of the Modern Economy

Capital-centred political economy hypothesizes instruments of production such as buildings and machines as fixed capital, and material wholly consumed in the production process as circulating capital. It characterizes the work-time of the working class and its claim on the value it produces as a cost to owners of capital.

This outmoded hypothesis distorts the social consciousness of the working class and middle strata. The hypothesis, which posits means of production and the value of work-time as capital and not social wealth belonging by right to the actual producers, is meant to instil in the brains of workers and intellectuals the notion that capital is the driving and necessary force in the creation of modern means of production and the production of all other goods and services. Without capital and its owners no modern production would occur, is the story workers are told endlessly. This story is brutally enforced in practice with the global movement of social wealth controlled by owners of capital without concern for the well-being of the working class, the economy and society.

The hypothesis of the necessity of capital for production to occur is a fraud. Means of production are the product of the work-time of those human beings who make them. Human beings have consistently fought to take control of the means of production and the goods and services they produce from any social class that usurps ownership and control from the actual producers. This class struggle of the people has driven society forward.

In modern society, owners of capital have usurped the ownership, control and use of the means of production and goods and services the working class produces. However, the actual producers of today are as determined as their forebears were to gain control and ownership of the social wealth they produce — their means of production and other goods and services their work-time produces. Just as slaves could produce without slave-owners, and serfs without landlords, the working class can produce and thrive without owners of capital.

Capital is a social relation that enslaves the actual producers, the working class, to owners of capital. The social relation capital exists within a specific very short historical period of the forces of production during their transition from petty scattered production to industrial mass production. The working class within the social relation capital is the actual producer of goods and services including the means of production but does not own or control its production or the means of production it uses.

The social relation capital was necessary as a bridge between feudal petty means of production and modern socialized means of mass production. The working class was not capable or numerous enough to overthrow feudalism and move society forward to modern mass production based on the application of science and technology. The working class had to endure the oppression within the social relation capital during the transition period from petty production to industrial mass production until the economy was socialized enough and the working class itself had gained the necessary strength in numbers, education, experience and maturity to win political power in a trial of strength with owners of capital.

The first attempt of the working class to free itself from the social relation capital, called the Paris Commune of 1871, lasted barely two months. However, it opened the consciousness of the working class to the possibilities of producing and living outside the shackles of the social relation capital. The class struggle to establish and defend the Paris Commune provided the working class with practical lessons for tactics and strategy in the battle to overcome its enslavement within the social relation capital. Karl Marx brilliantly summed up these lessons in his work, The Civil War in France.

The transition period ended decisively with the rise of monopoly capitalism around the beginning of the twentieth century. Workers and peasants of Russia proved that in 1917 with the overthrow of the transition period and the beginning of the first nation-building project led by the working class. This attempt of the working class to overthrow the transition period and strike out on its own, which lasted seventy-two years, proved conclusively that the working class no longer needs to endure the antagonistic social relation capital.

The two events, especially the formation of the Union of Soviet Socialist Republics, proved beyond doubt that the social relation capital is merely a transition form, which the working class must overcome to move society forward and completely break with the former feudal system of petty scattered production and class privilege dominated by clerical obscurantism.

Owners of capital hold the conceit that history has stopped progressing towards the elimination of social classes and class society, and the social relation capital will be forever necessary. The means of production of pre-capitalist economic formations were the products of the actual producers of those systems back to communal and pre-class times. The social relation capital was not necessary at those times to produce means of production and services, and is not needed in contemporary times, which is the era of the working class to emancipate itself and end all class exploitation.

Owners of capital were only necessary as a social force to move society out of feudal petty scattered production and introduce the generalized application of science and technology to mass production. Once industrial mass production extended globally as the dominant system, the existence of the social relation capital and its personification as a privileged social class of owners of capital exploiting the working class, became unnecessary, obsolete and a block to progress.

The working class is the social force necessary to complete the transition from petty scattered production to integrated industrial mass production on a global scale governed with new socialized relations of production in harmony with the socialized economy.

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A Most Extraordinary, Unique and Obsolete Exchange

Workers may feel the exchange of their capacity to work for wages is the most ordinary thing in the world but they are wrong: it is most extraordinary, unique and obsolete.

An ordinary exchange involves a use-value and a use-value, usually a use-value and money, which then can be exchanged for an equivalent use-value: a piece of pie for money, a car for money, a toy, a tool, a machine for money and then the money for an equivalent use-value.

A use-value is exchanged for an equivalent value in money. The buyer enjoys the use-value and the seller enjoys an equivalent value from the sale determined in large measure by its price of production. The money can then be used to buy a use-value, so in essence the exchange is a use-value for a use-value.

The sellers can also enjoy the full value of the use-value if they so desire. They can refuse to sell what they own and eat the pie, drive the car, play with the toy, and use the tool and machine to make something.

The situation is quite different when workers sell their capacity to work. They do not sell themselves as a use-value because slavery is not allowed under capitalism. Instead, they sell the exchange-value of their capacity to work, which is the price of production of themselves as potential workers, the work-time that has gone into creating their capacity to work.

In this most extraordinary and unique exchange, the workers are cheated because the value they receive in exchange for their capacity to work is less than the use-value it becomes in the possession of the owners of capital or their state who buy the potential and employ the actual use-value in work.

Workers cannot sell or enjoy the full value of their use-value, their capacity to work in action, because it exists for them only in its potential. For the capacity to work to become a use-value under the present relations of production, it must fall under the spell and control of the social relation capital. Owners of social wealth use their ownership and control of the means of production and domination over the state to deprive workers of mobilizing and deploying their potential to work on means of production under their own control in their own interests and the general interests of society.

What use is the capacity to work for unemployed workers? It exists as congealed work-time within workers to be exploited by owners of social wealth or their state upon the sale of its exchange-value. Without its sale, the exchange-value exists in its capacity to work as potential use-value but not in the reality of being at work, as actual use-value that can reproduce not only its capacity to work but also produce the additional full value of its use-value.

The unemployed workers have no use for their capacity to work, as they have no great social wealth that can employ workers within the social relation capital. If they had social wealth, they would not be workers much less considered unemployed. The capacity to work sits idle and does not come into being as use-value in its actuality until its exchange-value is sold and put to use on means of production within the social relation capital.

For the use-value of unemployed workers to come alive and be useful, those with social wealth or the state have to employ them within the social relation capital; they have to deploy them on means of production that they own and control. In return, they pay to the workers the exchange-value for their capacity to work, its potential use-value, and receive in return the actual use-value in action. The workers’ use-value in action produces its full value, which includes the exchange-value of the purchased capacity to work and the added-value that becomes the profit for the owners, the moneylenders and state. Also, the use-value in action facilitates the preservation and transfer, to the new product, of the congealed value of the means of production consumed during the production process.

Owners of social wealth and their state, who own and control the means of production, seize and control the workers’ use-value and all the value it produces, reproduces and transfers yet in return do not pay workers the full value of their use-value but only the exchange-value of their capacity to work, its potential use-value, which is less.

Unlike pie, cars, toys, tools and machines, the value of the capacity to work when consumed is greater than its exchange-value when sold. The difference between the exchange-value of the capacity to work, the potential use-value, and the value of the use-value in action is the added-value that expands social wealth and makes capitalists rich and privileged.

The exchange of workers’ capacity to work for wages is most extraordinary, unique and obsolete. The wage system within the social relation capital deprives workers of the right to deploy and control their work, and to direct and enjoy the fruits of their use-value, their capacity to work in action. The working class must organize to deprive the social relation capital and its state of the power to deprive workers of the right to ensure their work and the full value it produces is put to use for the benefit of the actual producers, their economy and the general interests of society.


Workers Must Increase Social Wealth Through Work to Be Considered Productive

Under the capitalist system, the capacity to work is useless unless it enlarges social wealth through work or serves to protect the social relation capital and its state. Owners of social wealth will not employ workers unless their capacity to work fits into their overall plan to enlarge their social wealth or serves their state in some way. The system perpetuates class privilege, the imprisonment of workers within the antagonistic social relation capital and its monopoly capitalist state.

If workers demand to be paid the full value of their use-value, which is their capacity to work in action, the owners of capital would not hire them. Why would they, when the only reason to buy workers’ capacity to work is to enlarge social wealth or protect it and the state. The difference between what workers receive in pay and the value they produce through work is the added-value seized by owners of capital, which makes them rich and perpetuates their class privilege.

If the added-value approaches zero, owners of social wealth will refuse to buy workers’ capacity to work. That is the reality of the social relation capital, which currently imprisons the working class. For this to change, the system must change from the present state monopoly capitalist system to a new socialist system of industrial mass production under the control of the actual producers, the working class, without the dead weight of the social relation capital around their necks.

Workers must remove themselves from the social relation capital and its state, and strike out on their own with full control of their use-value, which is their capacity to work in action. Workers would then fashion their own nation-building project, a state in their own image that vests sovereignty in the people. They would own and control the fruits of their work, especially the means of production, the deployment of their capacity to work, its use-value in action, and the distribution of the value their work creates upon transforming the bounty of Mother Earth.

The working class does not need the social relation capital and its monopoly capitalist state to work and produce. On the contrary, to enjoy the full fruits of their work, and fashion new harmonious relations amongst themselves and a new economic system without crises, unemployment, poverty, insecurity and war, the workers need independence and freedom from the social relation capital and its state.

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The Source of Value in the Production of
Goods and Services

Economic value arises from the work of the working class using already produced means of production to transform naturally occurring material into useable goods and provide services. The value workers produce and reproduce in the course of work using modern means of production is either transferred into additional means of production or consumed as goods and services.

The value workers reproduce and transfer into goods and services cannot and should not be termed a cost. The transferred-value from previously produced goods retains its value within the newly produced good or service. The transferred-value is paid for out of the value in which it now resides when realized (sold). Transferred-value cannot and does not become a cost within the production process. For owners of capital to term transferred-value as a cost to them simply because they pay for it is subjective and one-sided.

Owners of the means of production purchase material and instruments of production when organizing their businesses. The value of the means of production they purchase is transferred into the goods and services their workers produce. The transferred-value from the purchased and consumed means of production is returned to the owners when the newly produced good or service is sold to others. Workers through their work transfer already existing value into newly produced goods and services. This transfer occurs all at once with material such as iron ore, or over time with machinery, tools, buildings and equipment.

Capital-centred theory routinely terms a machine or building a “fixed cost,” iron ore a “circulating cost,” and workers a “cost of production or sales.” This is wrong. It distorts the modern integrated production process.

The value contained within the machine, building, and iron ore is preserved when transferred in the process of work to produce goods and services. The value of the capacity to work of the working class is reproduced when working and embedded within the good or service. When purchased, a value does not disappear and suddenly become a cost to its owners. The transferred-value, reproduced-value and added-value the working class produces are returned when the good or service is realized. The value cannot and should not be considered a cost to the economy or any participant in the economy.

A machine is a fixed asset representing actual value waiting to be transferred to new production of goods or services; iron ore is a means of production that transfers its value all at once when used; the working class reproduces through work the value of its capacity to work and in addition produces new added-value. The working class is the active human factor that transfers through work the value contained in means of production, and as well, reproduces new value containing the value of its capacity to work and produces added-value, which expands the pool of social wealth available in the socialized economy.

In economic theory, the machine and material represent objectified or congealed work-time with the potential through work to transfer the value of the objectified work-time to the production of new goods and services.

The original work-time to produce the machine, minus depreciation, plus work-time to maintain and renew the machine, give the machine its current value called fixed transferred-value.

The original work-time to produce and deliver material such as iron ore give it a current value, called circulating transferred-value.

The original work-time to produce the working class through its upbringing, education and experience, minus wear and tear on the body plus work-time to maintain the human factor through health care and other means give the capacity to work of the working class its current value in economic terms, which it constantly reproduces through work-time, and which has the potential to produce added-value beyond its reproduced-value.

The living or present work-time of the working class reproduces its capacity to work, both its individual formation and maintenance through the family, called individual reproduced-value, and its social formation through institutions of the society such as public education and health care, called social reproduced-value.

The value of reproduced-value in relation to the goods and services it can purchase within the economy is determined through the organized class struggle of the working class in defence of its rights, the level of development of the productive forces, social programs and public services, and whether the revolutionary movement of the working class internationally is in flow or retreat.

The living or present work-time of the working class also produces additional value called added-value, beyond the existing transferred-value it transfers into new production and the value of its capacity to work that it reproduces.

The work-time of the working class using already produced means of production to transform naturally occurring material into useable goods and provide services is the source of their economic value.

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