We come now to the heart of this tutorial, Marx's economic theories. It is worth noting that the subtitle of CAPITAL is "A Critique of Political Economy." Marx's work is as much a critique of previous economic theories as it is an analysis of the economic reality of capitalism. Karl Marx was, at one and the same time, the greatest of the classical political economists, bringing to completion more than a century of brilliant theorizing, and also the greatest critic of classical Political Economy, devastatingly exposing the inner contradictions and inadequacies of the classical tradition. In order to understand what he is talking about in CAPITAL, therefore, we must spend a little time tracing the evolution of classical Political Economy from its origins in France in the middle of the eighteenth century to the work of its greatest exponents, Adam Smith and David Ricardo, against whom and in continuation of whom, Marx wrote.
Political Economy begins with the effort of Turgot and Quesney to understand the French economy in the eighteenth century. These two theorists, who, with their fellows, have come to be referred to as the Physiocrats, conceived agriculture as central to the wealth of Old Regime France, so much so that they disparaged the productive efforts of artisans and craftsmen. Their great contribution to the field, and to subsequent theorists, was their recognition that the on-going productive economic activities of a nation must be conceptualized as an endless cyclical process of REPRODUCTION. The output of the nation at one point in time becomes the input of the productive process at a later point in time, so that there is a cycle of inputs and outputs, a cycle of reproduction. This season's harvest provides the seed corn for next season's planting. The iron ore dug from the mines this year becomes the shovels used to dig iron ore next year, and so on. [This is the origin of the title of Piero Sraffa's seminal little book, PRODUCTION OF COMMODITIES BY MEANS OF COMMODITIES.] There are, of course, some goods that are by their nature not reproducible -- old master paintings, for example, whose value lies not only in their beauty but also in their scarcity. Somewhat more importantly, one essential input into production -- land -- is not in general reproducible [although it is of course possible, on the margins, to carry out landfill operations that increase the available land, such as the project that created the ile St. Louis in the Seine in the middle of Paris.] This latter element in the process of production set for the classical theorists the problem of providing an adequate analysis of land rents, a problem that was solved by Ricardo in one of the most brilliant achievements of the classical school.
Although the Phsyiocrats did not themselves call attention to it, the concept of reproduction can be usefully applied even to that input into production on which we shall focus most of our attention, namely labor, for this generation's output of the production process [the children] becomes the next generation's inputs [the parents], thus justifying the use of the word "reproduction" to apply to that process as well. There is even a third sort of reproduction of which we shall have to take account eventually as our exposition goes forward, namely the reproduction of the social relationships and cultural institutions and ideological formations that constitute a society. But we are getting ahead of ourselves.
And now, a word of caution before we begin. This is a complex subject, and I have found it useful to proceed slowly when expounding it, starting with elementary concepts and postponing until later the introduction of the complexities and complications that are a part of the finished story. So please, before you write long comments asking why I have not mentioned these essential complexities, show a little patience. If you really want to know whether I am just ignorant of those complexities, then read my two books on Marx before you rush to comment. Thank you.
In order to have before use a numerical example of the process of reproduction, I am now going to introduce a little model of a very elementary economy. Like all models, its construction requires a good deal of abstraction.
Let us begin by imagining an economy in which there are only two produced goods [or, if you prefer, two categories of produced goods], corn and iron [or agricultural goods and industrial goods]. Each good requires inputs of corn, iron, and labor [forget about land for the moment], and in each sector of production, the combination of these inputs results in a certain quantity of output of one good or the other. [In deference to Marx's brilliant analysis of the commodity, I am not yet referring to these goods as "commodities."] Since all of these theorists lived in the temperate zone of the Northern Hemisphere. they all assume an annual growing cycle, and we shall follow that tradition. Here is a simple numerical representation of the economy we are describing. I choose to treat the reproduction of labor on a par with the reproduction of corn and iron because that is the way Marx thought about it [as did Ricardo, by the way]. Sraffa's approach is different, although either way is convertible to the other easily enough. Call this System A:
Corn Sector 100 units 2 units 16 units 300 units
Iron Sector 90 units 9 units 12 units 90 units
Total Input 190 units 49 units 47 units
A few preliminary observations about System A;
1. The size of the units is not indicated, but since this is supposed to be an annual cycle of reproduction, presumably they are pretty big [millions of tons of corn, or something like that.]
2. There is not the slightest indication of what technology of production is being used. Important though that obviously is, it is irrelevant for the purposes to which we are going to put this model. Following the Classical Political Economists, we assume that there is one and only one dominant technique used for the production of each good. If some entrepreneur introduces a new and more efficient technique, the pressure of competition pretty soon forces all the other entrepreneurs in that line to adopt it, and it becomes the new standard.
3. Notice [this is crucially important] that both corn and iron are required as inputs in each line of production.
4. I could make the model somewhat more elaborate, in an effort to do a better job of mimicking reality, but that would not change the theoretical analysis. It would just require us to use rather more sophisticated mathematics. I prefer the transparency of the simple model. In a more complex model, there might be hundreds of sectors of production, and in some of them [this too is crucial] some goods might not be used as inputs, but they might be used in the production of goods that were themselves used in the production process, and so we could say that they were indirectly required. In general, there will be a distinction [also crucial -- there is a lot of crucial stuff here] between those goods that are directly or indirectly required in every single line of production, and those goods that are not directly or indirectly required in every line of production. For reasons that will become clear, we shall call the first group of goods basic Goods, and the second group Luxury Goods. In System A, iron and corn are both Basic Goods.
5. This model is deliberately so simple that it even ignores fixed capital, which lasts through more than one cycle of production, and joint production, a situation in which a given technique of production has two or more salable outputs. As I said earlier, I am going to creep up on the more complicated cases.
Even the most cursory inspection of System A reveals that in each cycle of production, there is more output than is required for the next cycle's input -- 251 units of corn and 43 units of iron, to be precise. [The fact that there is, at this point, no extra labor produced is actually analytically important -- wait for it.] If we meditate on this fact for a bit, three questions should occur to us. All of Economics, Sociology, History, and Political Science is nothing more than attempts to answer these three questions.
The first question is: WHO GETS THE SURPLUS?
The second question is: HOW DO THE SURPLUS-GETTERS GET THE SURPLUS?
The third questions is: WHAT DO THE SURPLUS-GETTERS DO WITH THE SURPLUS WHEN THEY GET IT?
Tomorrow we shall begin answering these questions, in the course of which we shall hear about Natural Price, Productive and Unproductive Labor, Necessary Labor and Surplus Labor, Base, Superstructure, Ideology, The Labor Theory of Value, and other arcana. Stay tuned.