Karl Marx

The analysis of capitalism that Karl Marx presented in the three volumes of Capital remains vital to understanding our social world.

The first group of capitalists is what Marx calls “industrial” capital, and the second group of capitalists is what he calls “commercial” capital. Surplus value was generated; part of it is realized by the capitalists who generated it, part of it is handed over to the commercial capital, because the commercial capital will ensure that the commodity is actually sold. In the competition between two capitalists, the capitalist who is able to reduce the cost of production will be able to win the competitive struggle. The interruption of this generation, circulation, and realization of surplus value is what Marx calls “the period of crisis.” A crisis can happen if a lot of surplus value has been produced and for some reason the commodities are not able to be sold, so all that surplus value that was produced is not being realized. And a lot of the consumption goods that are being produced will be purchased not only by the workers in the consumption goods factories, but by workers in the machine goods factories. In volume II, he comes back to the question: How is it that the capitalist system is able to produce a lot of commodities and then to make sure that all those commodities are purchased at the prices that are necessary to realize all the value? So it is the decision of capitalists of how much to invest, of how much commodities they want to produce, which ultimately will determine whether all the commodities that have been produced will be bought. In volume I of Capital, Marx’s question is to understand how surplus value is generated and what the capitalist class does with that surplus value. So utility is really a subjective phenomenon, and therefore the theory of value that derives from utility is a subjective theory of value. Because if that mechanism is not available, then capitalism will be in jeopardy because there will be no way of ensuring that wages do not rise to the extent that profits fall to zero. An abstract way to understand a capitalist society is to start with a capitalist or the capitalist class entering the market with sums of money and using those sums of money to purchase two kinds of commodities: labor power — the ability to work — and all other nonlabor inputs that are used in production. The second is that in capitalism there is the phenomenon of credit, whereby banks can make credit available to capitalists, who can make credit available to households.