Karl Marx, Capital (Das Kapital)(vol 1)(I)

CAPITAL (DAS KAPITAL) (Vol. 1)
by
Karl Marx
(Britannica Great Books translation)

Economic value:

Of those who have waded through "Das Kapital," few - especially among the "Marxists" - had the economic knowledge to evaluate it. Indeed, very few who call themselves "Marxists" - it is widely acknowledged - have ever bothered to even read Karl Marx. This is quite understandable.
&

The rationalizations begin with a tautology - contain major blatant contradictions - are permeated with distinctions that don't reflect any differences - and are based on definitions and redefinitions of economic terms that are indeterminate, completely without function in the real economy, and applied in slipshod and clearly inappropriate fashion.

Volume 1 of Das Kapital is 383 small print - densely paragraphed pages in the Britannica Great Books translation. It is composed of tediously interminable, repetitively and minutely detailed rationalizations, that are nevertheless obviously incomplete and irrational. About 100 pages are dedicated to presenting the undoubted horribles of economic life in the 19th century and in the several centuries prior to that period.
&
This is continued through the next two volumes, as well - in total, approximately 1800 pages. The primary affect of this design is to smother the many omissions and flaws of logic - and thus to shed much heat while providing little light. The rationalizations begin with a tautology - contain blatant contradictions - are permeated with distinctions that don't reflect any differences - and are based on definitions and redefinitions of economic terms that are indeterminate, completely without function in the real economy, and applied in slipshod and clearly inappropriate fashion.
&
Yet, the concept of capitalism presented can all be accurately stated in a few paragraphs.

Only productive labor adds value to the commodities produced. Labor itself is "a particular commodity" - "labour power" - that is saleable like a commodity - and is measurable in terms of an abstract labor standard - based on duration of average simple unskilled subsistence wage labor. The "labor power" standard can be used as a unit of measure like the "horsepower" standard.
Capitalists - as owners of capital - contribute no labor to commodities and thus contribute nothing of value to production.
Commercial factors contribute no labor to commodities, and thus contribute nothing of value to production,. At most, they just prevent loss of value during circulation.
Capitalist wealth is totally due to egregious misappropriations of productive assets beginning as far back as the period of the breakup of feudalism - "primitive accumulation" - and/or to the subsequent exploitation of laborers who have been separated from the means of production and thus made dependent on capital.
Capitalists are thus entitled to nothing back from the productive process except the wages they pay for labor. Anything more that they receive constitutes "surplus value" that they have extracted by the unjust exploitation of labor.
All capitalist expansion is achieved only by capitalizing surplus value.
Therefore, the capitalist ownership interest can be dispensed with without economic loss - with considerable justification - and with gain from the elimination of capitalist exploitative conduct.
The natural course of capitalism is towards greater concentration of wealth and power. Continuous increases in productivity cause overproduction, squeeze profits, cause periodic economic crises, and make "redundant" an ever enlarging "reserve army" of unemployed and underemployed workers. Capitalists respond to these factors by mercilessly imposing ever harsher working conditions and by squeezing more labor for lower wages from their workers.
The plight of labor must thus inevitably worsen as capitalists greedily strive to maintain and increase their profits. Ultimately, an ever more numerous and aroused proletariat will overthrow their capitalist bosses and retake control of productive assets. See, Karl Marx, "Capital (Das Kapital)" vol. 1, Part II, "Contradictions Asserted in Capitalist Industrialization."

Note: Throughout these articles on Volume 1 of Das Kapital, the term "profits" is used as normally defined - NOT as redefined by Marx in Volume 3.

Das Kapital is full of obvious important internal inconsistencies, a basic reliance on tautological reasoning, numerous distinctions without practical difference, bald denials, selective - one hand clapping - analyses of causation, semantics games based on sly and nonfunctional definitions and redefinitions of terms, and a host of omitted essential factors.

Even Marx, although working feverishly on Das Kapital for about three decades, ultimately found it impossible to work logically with his own ideas.

There are obvious answers to this narrow Marxist view of the labor theory of value and the expectation of chronic capitalist crisis.

Management adds value to labor. Indeed, in the modern world, and even well before the middle of the 19th century, most of the value of labor is attributable to management.
Without the incentives of the ownership interest - and the signals provided by commercial and capitalist markets - good management is impossible. Indeed, so important are the ownership incentives that - even with market signals - government management is INHERENTLY inept.
In socialist nations that lack both ownership incentives and market signals, "government economic management" is an oxymoron.
That goods in the market are worth more than goods on the manufacturer's loading dock is observable fact. This additional value can only come from the commercial factors that bring goods to market.
Workers have in fact been visibly improving their lot in the advanced capitalist nations since the middle of the 19th century, and a growing middle class has been providing an ever widening array of goods and services that are clearly far more than just "luxuries."
Increases in productivity always permit an economy to produce more goods and services than before - as well as new goods and services that previously could not be economically provided. The changes caused by increased productivity always bring more opportunities than hardships.

Adam Smith evenhandedly recognized both the abuses and economic contributions of industrialists, financial institutions and merchants - with explanations that are both brief and remarkably clear. See, Adam Smith, "The Wealth of Nations," (Part I - "Market Mechanisms"). Karl Marx, on the other hand, created a dense rationale for emphasizing the undoubted abuses and arguing that all the contributions of the capitalist ownership interest and capitalist financial systems are of no value and can thus be dispensed with.
&
Repeatedly, Marx's logic breaks down. There are obvious important internal inconsistencies, a basic reliance on tautological reasoning, selective - one hand clapping - analyses of causation, numerous distinctions without practical difference, bald denials, semantics games based on sly and nonfunctional definitions and redefinitions of terms, and a host of omitted essential factors - as will be presented throughout these articles. They demonstrate that even Marx - although working feverishly on Das Kapital for about three decades - ultimately found it impossible to work logically with his own ideas.
&

The labor definition of value is exclusive because other things of value in the market don't meet it. Things of value that don't involve industrial labor have no value because they don't involve industrial labor.	Glaringly omitted from the Marx definition of economic value are all the factors that contribute to economic production of goods and services but that have no direct relation to labor on commodities as defined by Marx. Marx perforce recognizes a few of these omissions - things that are bought and sold in the market - things that have a market price - like honor and conscience. Quite unscientifically - and in this instance with remarkable brevity - buried in the bowels of the book - he has recourse to a tautology. & His narrow labor definition of value - limited to industrial labor use-values - is exclusive because other things of value in the market don't meet it. Things of value that don't involve industrial labor have no value because they don't involve industrial labor. Since the labor theory of value is scientific truth, it cannot be undermined even by a multitude of obvious exceptions. Any value that doesn't conform to it must therefore be "imaginary." He is the Wizard of Oz exclaiming: "Pay no attention to those values behind the curtain." & Thus omitted from economic value - besides honor and conscience - are such obviously essential economic factors as land, reliability, courage, variety, mental and physical talent, savings, financial independence, financial security, scarcity, rarities like works of art and antiques, the absorption of risk, the universe of financial services, the time cost of money (interest rates), the time cost of productive assets, the productive incentives of the ownership interest, the commercial activities that bring goods to market, competition, without which efficient management is impossible, all of the management tools available only to profit-seeking enterprises, without which efficient management of complex economic entities is impossible, and all the signals provided by commercial and capitalist markets, without which efficient management is impossible. Late in Volume 3, Marx notes in a single sentence that works of art and such are not a part of these "scientific investigations." &
After all, who needs all those management processes of capitalism if they can all be replaced simply by the issuance of communist directives?	Two centuries of socialist experiments at all levels would fail abysmally because of their inability to efficiently function without such factors. Deferred maintenance and inability to keep up with technological advances would be particular problems with socialist experiments at the national level due to the absence of such factors as ownership incentives and the time cost of money. The factor of quality would prove difficult to evaluate - and variety an impossibility. The lack of incentive for diligence would be a problem for all socialist enterprises that are managed in an egalitarian manner. Under egalitarian socialism, the average level of labor intensity would drop precipitously. In the Soviet Union, the workers would explain: "We pretend to work, and they pretend to pay us." A lack of competition would be a prescription for gross inefficiency in any system - even capitalist systems. No other system is as reliant on ethics as capitalism. It runs on trust and reliability at every level - one of the primary reasons for its efficiency and success. That there are failures and scandals is not nearly so remarkable as the relative infrequency with which they occur. The incentives of the ownership interest - which are peculiarly sensitive to the risks and rewards of enterprise - provide the only mechanism with which to even roughly balance ambition with caution - to generate prudent action. Exploitation of labor by the state in autocratic socialist systems would routinely prove far more onerous - and far more inescapable - than even the worst examples of exploitation by capitalists. With incredible naïveté, Marx - and the Marxists that came after him - would assume that socialist systems would solve all their managerial problems simply by issuing appropriate directives - backed up by terror and the use of force. After all, who needs all those management processes of capitalism if they can all be replaced simply by the issuance of communist directives? &
Marx commits the ultimate sin in economics - he is not practical. Any concept of value that cannot be accurately and readily calculated is useless for the fundamental purpose of allocating scarce resources. Marx is attempting to clap with just one hand. True, that one hand is responsible for the clapping - but not alone - or even predominantly. And worse - Marx offers just half a hand - omitting for his propaganda purposes major factors even on the supply side.	However, the impracticality of the Marxist abstract labor standard would be the most damaging weakness. For all his dense explanations: Marx - and the Marxists who followed him - would fail to explain how his abstract labor standard of value would apply to the vast mass of real labor that - because of talent, diligence and/or skill - rises above average levels. Indeed, they would never be able to determine how much unskilled labor of each particular type and level of diligence is needed to reach subsistence labor levels. Thus, rapid calculations of "undifferentiated human labor" values for each of the myriad of products and services produced in an economy would prove impossible. "Labor power" is not anything like the physically measurable "horsepower" standard which is applied in turn to physically measurable phenomena. Economics, after all, is a practical art by which scarce resources are allocated. Marx commits the ultimate sin in economics - he is not practical. Any concept of value that cannot be accurately and readily calculated is useless for the fundamental purpose of allocating scarce resources. & Marx, himself, would repeatedly be forced to have resort to market prices as an approximation. Where there are no market prices - as in socialist experiments based on administered prices - it would remain impossible to evaluate real labor in terms of the standard labor unit devised by Marx. & Marx is attempting to clap with just one hand - consisting of factors of supply. True, that one hand is responsible for the clapping - but not alone - or even predominantly. And worse - Marx offers just half a hand - omitting for his propaganda purposes major factors even on the supply side. & Of course, capitalist systems, too, would prove grossly inefficient whenever administered prices were substituted for market prices - or whenever markets became almost totally uncompetitive. The pricing mechanism of even modestly competitive capitalist markets easily proves far superior to all administered pricing alternatives. & "Rationing by the purse" invariably proves to be the most efficient - and the fairest - method of allocating scarce resources. Today, in the U.S., major segments of the vital health care industry are providing a prominent example - and are staggering under the burdens of administered pricing procedures. &
Propaganda myths:	And there is more - much more - that is grossly stupid in Das Kapital - as will be presented in these articles as the details of the Marxist propaganda myths are set forth.

Pseudo science:

The propaganda purpose of this book becomes apparent even before it begins. Marx starts right off in his Preface to the second edition by invoking the science propaganda ploy - a common practice for him by this time. After all, who can doubt the word of "science?"
&

Marx predicts the imminent demise of capitalism.

However, the approximately one dozen forecasts made in this book on the basis of its "scientific" theories turn out to be almost entirely in error. It is the most basic principle of science that when forecasts go wrong, something must be amiss with the theory. What could it be?
&
The ridiculousness of this claim to scientific certitude is immediately revealed when Marx - in the same 1873 Preface (during a time of economic recession) - confidently and smugly predicts the imminent end of days of capitalism. The bourgeois economy was already "in the time of its decline" in the advanced Western nations. The business cycle was visibly - to Karl Marx - reaching the point of capitalist overproduction where it would produce an economic collapse that would be chronic and catastrophic.

"The contradictions inherent in the movement of capitalist society impress themselves upon the practical bourgeois most strikingly in the changes of the periodic cycle, through which modern industry runs. That crisis is once again approaching, although as yet but in its preliminary stage; and by the universality of its theatre and the intensity of its action it will drum dialectics even into the heads of the mushroom-upstarts of the new, holy Prusso-German empire."

Of course, the "mushroom upstarts" would prove to be the Marxists. The last quarter of the 19th century would be a period of unprecedented economic growth and widening prosperity in capitalist nations - and although not without serious problems, the 20th century would be much better.
&
Like certain religious sects that are forever expecting the imminent Apocalyptic end of days or the coming of the Messiah, Marxists and some socialists and Keynesian economists - even as late as the 1990s - would stupidly expect every downturn in the business cycle to develop into the predicted chronic depression of "mature" capitalism.
&
So much for scientific certitude. For Marx as for so many other ideologues, reality is perverse. It simply refuses to conform to ideological expectations.
&

Economics is a nonscientific practical art - requiring a professional analytical approach.

Karl Marx is very aware of the propagandistic use of the term "science," and repeatedly accuses others - especially other socialists - of this propagandistic misuse of the term.

Economics is not a "science" in any meaningful sense of that term. It is a nonscientific practical art - requiring a professional analytical approach - like law and accounting and warfare and the delivery of health care - and like politics and sociology - two other fields with stupid pretensions to scientific status.
&
Scientific certitude - something that is not without considerable variability even within those experimental sciences that enjoy broad access to the full scientific method - is the closest to absolute certainty that humans can rationally come.
&
However, the "scientific method" is not broadly available in the nonscientific practical arts. The availability of some useful scientific tools is not sufficient to broadly provide scientific certitude in such fields. The availability of paints and brushes made scientifically by Dupont does not change painting into a "science."
&
The most that can be expected in these fields is the opinions of professionals. Such professional opinions - when offered by professionals with deep understanding of their fields - can be remarkably reliable - but scientific certainty they cannot provide.
&
Only propagandists - and the ignorant - speak of economics and these other fields as "science." Karl Marx is, of course, very aware of the propagandistic use of the term "science," and repeatedly accuses others - especially other socialists - of this propagandistic misuse of the term. This pot does not hesitate in calling the kettles "black."
&

In Das Kapital, the obviously vital productive roles of capitalist commerce and private ownership interests are being rationalized away and made to disappear.

For Karl Marx is here performing propaganda magic. Like Lamont Cranston - "The Shadow" back in the days of radio drama - he is clouding the eyes of the suitably credulous so that obvious aspects of reality seem to disappear.
&
In Das Kapital, the obviously vital productive roles of capitalist commerce and private ownership interests are being rationalized away and made to disappear - for a surprisingly large class of suitably credulous people. Many of these people nevertheless pride themselves on being part of an "intellectual elite" - knowledgeable of worldly matters - and capable of taking charge of and managing the economy of a communist utopia.
&
Most of these true believers never plumb the depths of the caliginous bog of interminable rationalization tedious with detail and repetition - but nevertheless glaringly incomplete - with which Marx blinds their eyes. With the faithful - those that blindly follow Marxism as a secular religion - those ideologically willing to be blinded to reality - Marx succeeds magnificently.
&
Karl Marx is clearly the modern world's most successful propagandist. However, his economics is grossly incompetent - as is shown throughout this review. There is, after all, a major difference between "rationalization" and "reason."

"The labour time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time."

Marx thus must create an abstraction - an objective labor standard of value - both for propaganda purposes and as an alternative to capitalist market exchange values.

It must be "abstract" - not dependent on actual labor expended.
It must be "simple" - based on the effort required of unskilled labor to achieve subsistence.
It must be "homogeneous" - "one uniform labour power" - an average - existing similarly in all marketable items.

Unlike "horsepower," however, it is not a fixed measurable physical standard for application to other measurable physical phenomena. It must change with changes in the various conditions of production and the needs of society. It is impossible to apply to labor that by talent and/or skill rises above the simple, unskilled subsistence level. It cannot by itself even determine how much of each of the multifarious forms of labor working under multifarious conditions is actually needed to cover subsistence costs.

It must be "socially necessary" - to eliminate useless labor. This factor is something else that is highly variable.

This requirement for "socially necessary" labor is especially important, because it is the only objective factor that ties the narrow industrial labor concept of "value" to the market. However, these "values" are constant - rigid - changeable only slowly over long periods with changes in the industrial factors of production - and totally unresponsive to the wishes of consumers. Actual day-to-day conditions in the market have no impact on values. They only affect the extent to which such values can be "realized" in terms of money.
&
In one of his numerous digressions - here during discussion of ground rents in Volume 3 - Marx provides an explanation of the extent to which production in excess of "social need" affects "value." In short, it doesn't affect "value" at all. "Value" remains the same - a constant in the short run. However, it becomes "impossible to realize the value of the commodity and thus the surplus-value contained in it," if goods are overproduced.

"[Assuming that] too much cotton goods have been produced, [then] too much social labour has been expended in this particular line; in other words, a portion of this product is useless. It is therefore sold solely as if it had been produced in necessary proportions."

It is hard to know where to begin to explain the multiple weaknesses revealed in this short digression.

Marx has just eliminated the only objective factor he recognizes on the demand side that can provide guidance on immediate market conditions for producers. "Value" is totally supply driven - and driven by only a narrow part of the supply-side factors. The market just determines the cutoff point, after which these values are being produced in excess.

This view of consumer markets is totally rigid, unresponsive and simplistic. While "value" can at least change over time, "social need" is a fixed quantity, not subject to expansion or contraction in response to price changes due either to market conditions or changes in production or substitution among similar products. In the workers' paradise, everyone must live like monks. Nobody is entitled to own an extra shirt, or an extra dress - or to aspire to higher quality goods or items of greater variety. Marx is concerned only with subsistence level living.

"Social need" is fixed in time. Cotton goods are not even perishable, yet an oversupply renders some of it "useless." There is no expectation in this paragraph that time and producer responses to market conditions can ultimately allow the market to clear with all goods sold.

Other than the oversupply, the rest is sold "solely as if it had been produced in the necessary proportion." There is here no indication of decline in value or even of price - nothing to signal producers to reduce production until the market clears - no appreciation of factors that permit flexible and sensitive response to supply and demand conditions.

Marx, of course, is fully aware of the functioning of capitalist markets. How capitalists are dominated by the forces of market competition is a pervasive theme in Das Kapital. Substitution effects apply even for necessities. Consumption can vary over time even for necessities.
&
In Volume 3, he recognizes that "it is not true that the consumption of necessities of life does not increase as they become cheaper. The abolition of the Corn Laws in England proved the reverse to be the case." Sudden price variations may be met with an inelastic demand curve, but price changes over time will affect consumption. Also, necessities can be produced for non-essential uses - as when grains are used for whiskey. Also, substitution effects apply when more than one type of commodity can fill necessary requirements. And, international trade introduces additional elements of elasticity into a market for necessities.
&
However, his basic attitudes towards those functions caused this remarkable slip-up. Market functions have no value. They can be dispensed with - easily replaced with appropriate socialist "directives."
&
Numerous direct contradictions arise throughout Das Kapital because of this obvious requirement that labor be "socially necessary." This becomes painfully clear in Volume 2 when Marx tries to dismiss as "an illusion" all value dependent on commercial activities that don't directly involve the industrial laborer. See, Karl Marx, Capital (Das Kapital) (vol. 2 Part III), "The Circulation and Expansion of Capital," and Karl Marx, Capital (Das Kapital) (vol. 2 Part IV, "Criticism of Smith's Definition of Capital."

Incredibly, not only Marx, but all Marxists ever since would remain dumb with respect to the extent that their narrow labor theory of value - limited to industrial labor use-values - necessarily violates this essential requirement that labor be "socially necessary."

It must be embodied in "commodities."

"Each of these units is the same as any other, so far as it has the character of the average labour power of society, and takes effect as such; that is, so far as it requires for producing a commodity no more time than is needed on an average, no more than is socially necessary. The labour time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time."

Homogeneous commodities all are measured by the same kind of value regardless of the actual labor employed in bringing them to market.

Marx then must define "commodity."

It must be "an object of utility."
It must require labor - not be freely available like air or water.
It must be produced for others - not just for the personal use of the producer.
It must be transferred by "exchange" in the market - not provided to others as a servitude.

Marx would forget these last two requirements when insisting that Adam Smith was in error for stating that seeds retained by a farmer are among his "fixed assets." Marx insisted they were "commodities" that the farmer "sold to himself."

Labor itself is also a "value" exchangeable in the market, but it is "a particular commodity" with peculiar characteristics.

Thus, homogeneous commodities all are measured by the same kind of "value" regardless of the actual labor employed in bringing them to market. They "are only definite masses of congealed labour time." They embody not just utility, but also value for exchange for other commodities.

As much trouble as socialist experiments had in assigning values to homogeneous commodities, they would prove totally incompetent with non homogeneous commodities. Factors of quality and variety were beyond their capacity to deal with. The world of services - inherently variable - was alien territory. And, of course, valued characteristics that were not the product of labor - characteristics both useful and scarce - like honor, courage - and the incentives of ownership - are dogmatically excluded from the system - laughably dismissed as "imaginary" values - because of the lack of labor involved in their creation.

The abstract labor standard is "human labour pure and simple" that need only be defined in units of time for purposes of the calculation of values.

When coats are exchanged for linen, the exchanged items clearly have different values in use, but they have the same value in exchange - which is measured by Marx in equivalent amounts of "labour in its abstract character."

To make his labor standard "homogeneous," Marx reduces it to its lowest common denominator - "unskilled, simple labor." This is "human labour pure and simple" that need only be defined in units of time for purposes of the calculation of values.
&
As Adam Smith pointed out for the wage laborer, it is a constant determined by what is required for the laborer and his family to survive and reproduce. While the subjective value in utility - "use value" - and the objective value in exchange - "exchange value" - of the products of this labor vary with the momentary changes in various factors - the abstract, objective simple labor standard itself remains relatively constant - affected only by changes in long run factors of productivity and use.
&
By the time Marx is writing, the level of productivity is a capitalist level - and no unskilled labor could produce enough commodities to subsist with a family without the tools and materials supplied by capitalists. All "unskilled, simple labor" is by itself below subsistence level - and must depend on capitalism to survive. See, "Surplus labor," below.
&
Exchange values are objective and precisely determinable. However, they are inevitably influenced by abstract human labor values no matter what the different forms of labor actually applied in bringing the exchanged items to market. Thus, weaving, "in so far as it weaves value, has nothing to distinguish it from tailoring, and, consequently, is abstract human labor" when coats are exchanged for a particular amount of linen in the market. "The value of a commodity obtains independent and definite expression by taking the form of exchange value."
&
Marx spends inordinate time explaining this difference between the subjective use values of items and their objective values in exchange. When coats are exchanged for linen, the exchanged items clearly have different values in use, but they have the same value in exchange - which is measured by Marx in equivalent amounts of "labour in its abstract character." How many coats can be exchanged for how much linen is determined by productivity - which is a variable for "labor in the abstract."
&

Marx recognizes the magic of the market. In the bargain, each party gives up a value - which the bargain makes objectively determined - and receives use value - which remains subjective within the recipient. Absent mistake, the values given up - the abstract labor values - are equivalent. Not so the use values.
&
Absent mistake, the objectively determined exchange value given up is the minimum that the subjective use value can be - and the use value will usually be more - even considerably more - so that both sides feel that they have gained in the bargain. Moreover, by specialization, market participants may considerably increase the saleable labor value they bring to market and with the proceeds thus procure far more use values from the market.

"With reference, therefore, to use-value, there is good ground for saying that 'exchange is a transaction by which both sides gain.'"

However, in terms of labor value, there is no gain, for they have given value for value.
&
Similarly, in the bargain, particular types of labor are manifested in amounts of "abstract human labor" that can be compared by means of the exchange of the commodities produced. Even though different forms of "concrete labour" cannot be directly compared, by manifesting itself in its opposite, "abstract human labour," comparisons can be made.
&

The labor that creates one type of commodity "stands expressly revealed as labour that ranks equally with every other sort of human labour."

It is the magnitude of value that controls exchange proportions.

For barter economies, a value relationship must be calculated between each commodity and all other commodities in trade. Each isolated exchange results in a "different elementary expression" of value that must be repeated for each of the numberless commodities in the economy. Here it is revealed that value "in its true light" is just "a congelation of undifferentiated human labour."
&
The labor that creates one type of commodity "stands expressly revealed as labour that ranks equally with every other sort of human labour, no matter what its form, whether tailoring, ploughing, mining, etc., and no matter, therefore, whether it is realized in coats, corn, iron, or gold." This equality of labor places all commodities in "a social relation - - - with the whole world of commodities." The particular forms of use value have become irrelevant.
&
The values as determined by barter between two commodities may be mere accident, but the complex of values throughout a complex economy cannot be accidental. Thus, "it becomes plain that it is not the exchange of commodities which regulates the magnitude of their value; but, on the contrary, that it is the magnitude of their value which controls their exchange proportions." And that value is determined by the "undifferentiated human labour" congealed within each commodity.
&

"The equalization of the most different kinds of labour can be the result only of an abstraction from their inequalities, or of reducing them to their common denominator, viz., expenditure of human labour power in the abstract."

In the production of commodities, human labor, too, takes on a social character. This social character does not show itself, however, until the products of that labor - the commodities that were produced - are exchanged in the market.
&
Marx goes into typical repetitive detail in explaining the character of labor when engaged in producing goods of a useful nature for market. The following is a brief sample.

"[To the producers], therefore, the relations connecting the labour of one individual with that of the rest appear, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things. - - - This division of a product into a useful thing and a value becomes practically important only when exchange has acquired such an extension that useful articles are produced for the purpose of being exchanged and their character as values has therefore to be taken into account, beforehand, during production. - - - [This labour] must, as a definite useful kind of labour, satisfy a definite social want, and thus hold its place as part and parcel of the collective labour of all, as a branch of a social division of labour that had sprung up spontaneously. On the other hand, it can satisfy the manifold wants of the individual producer himself, only in so far as the mutual exchangeability of all kinds of useful private labour is an established social fact, and, therefore, the private useful labour of each producer ranks on an equality with that of all others. The equalization of the most different kinds of labour can be the result only of an abstraction from their inequalities, or of reducing them to their common denominator, viz., expenditure of human labour power in the abstract. - - - [In the exchange of products], the character that his own labour possesses of being socially useful takes the form of the condition that the product must be not only useful, but useful to others, and the social character that his particular labour has as being the equal of all other particular kinds of labour, takes the form that all the physically different articles that are the products of labour, have one common quality, viz., that of having value."

"The determination of the magnitude of value by labour time is therefore a secret, hidden under the apparent fluctuations in the relative values of commodities."

He presents the labor theory of value as a great discovery - a discovery begun by economists like Smith and Ricardo, but only brought to completion by Marx - a discovery equivalent to that of laws of nature like gravity. That it is hidden behind the money form of values serves to conceal "the social character of private labour, and the social relations between the individual producers."

"[In] the midst of all the accidental and ever fluctuating exchange relations between the products, the labour time socially necessary for their production forcibly asserts itself like an overriding law of nature. The law of gravity thus asserts itself when a house falls about our ears. The determination of the magnitude of value by labour time is therefore a secret, hidden under the apparent fluctuations in the relative values of commodities. Its discovery, while removing all appearance of mere accidentality from the determination of the magnitude of values of products, yet in no way alters the mode in which that determination takes place."

Unfortunately, absent guidance from a fairly competitive market, the abstract, simple human labor standard is impossible to apply to either labor or commodities.

To begin his attack on the bourgeois form of production, Marx provides an account of other forms of production in history and in contemporaneous societies. The "fantastical" bourgeois form is neither a law of nature nor immutable.
&

The impact of economic exchange:

Commodities become commodities by their exchange. By exchange, they both achieve exchange value for the provider and use value for the purchaser. Only by exchange does the labor spent upon them prove itself "useful for others." Indeed, "the labour spent upon them counts effectively only in so far as it is spent in a form that is useful for others."
&

Because of the market economy and money, the relations of producers "to each other in production assume a material character independent of their control and conscious individual action."

Property rights are an essential feature of exchange. In tribal communities, where all property was held in common, exchanges occurred only at the margins, between one tribe and another with the property each community owned. However, as soon as such exchanges turn property into commodities, they are viewed as such for internal intercourse as well. "What makes them exchangeable is the mutual desire of their owners to alienate them" to acquire the "foreign objects of utility" that they can be exchanged for.
&
Ultimately, some "products of labour" will routinely be produced not for their use value or consumption, but for what they can bring in exchange.

"From that moment the distinction becomes firmly established between the utility of an object for the purposes of consumption, and its utility for the purposes of exchange. Its use value becomes distinguished from its exchange value."

The proportions with which they are exchanged is dependent on the labor in their production. Custom soon "stamps them with values of definite magnitude." These values come to be measured in relation to the money commodities - in the 19th century, gold and silver. These appear to become even in their raw form "the direct incarnation of all human labour."
&
Once established, money appears to take control of the production process.

"Hence the magic of money. In the form of society now under consideration, the behavior of men in the social process of production is purely atomic. Hence, their relations to each other in production assume a material character independent of their control and conscious individual action."

Thus, the riddle of money is "the most glaring form" of the riddle of commodities.
&

Market price is usually only an approximate - seldom an exact or "ideal" - measure of "value" as defined by reference to the abstract labor standard.

However, prices fluctuate sometimes with great volatility. Price thus is not necessarily an accurate reflection of social labor value. Prices may be set either too high or too low in comparison with the value of the social labor represented by the product.
&
Marx thus must deal with the observable fact of price volatility. Since no concept of labor value can be permitted to rise and fall as rapidly as prices fluctuate, he must distinguish between price and value.

"If the conditions of production, in other words, if the productive power of labour remain constant, the same amount of social labour time must, both before and after the change in price, be expended in the reproduction of a quarter of wheat."

There is no necessary relationship between magnitude of value and price. Indeed, deviations between the magnitude of value and price are more than just possible - they are "inherent in the price form itself." However, this is perfectly proper, since the "apparently lawless irregularities" of the pricing system "compensate one another" by fluctuating about a mean level. Market price is usually only an approximate - seldom an exact or "ideal" - measure of value.

But if even the market - through its pricing mechanisms - cannot accurately establish "value," how is value to be determined without guidance from the market? How can a system allocate scarce resources without the pricing mechanism? How can it determine to increase production of certain items by reducing production of others without the sensitive guidance of price fluctuations in the market?
&
The socialist alternative would be "five year plans" divorced from reality and based on administered allocations of scarce resources - allocations almost always of incredible stupidity even with respect to quantities. They generally don't even address the factors of quality and variety.

An object may have a price without having value. The price in that case is imaginary, like certain quantities in mathematics."

Marx, himself, is repeatedly forced to have recourse to market price as the measure of value for his examples.
&
Here, Marx reaches the point where he must deal with attributes that clearly have a price but are not produced by labor. On the basis of his false premise about the limited scope of economic value, he draws an absurd conclusion.

"Objects that in themselves are not commodities, such as conscience, honour, etc., are capable of being offered for sale by their holders, and of thus acquiring, through their price, the form of commodities. Hence, an object may have a price without having value. The price in that case is imaginary, like certain quantities in mathematics."

The scarcity element of value doesn't exist for Marx except as it is a factor in determining the degree of social necessity for labor on commodities. He thus dismisses it - without bothering with any justification - as "imaginary." This feeble rationalization may suffice for a propaganda myth, but it is hardly a proper application of "scientific" method.
&
Of course, Marxists adamantly deny any value for the incentives of the ownership interest. Similarly denied is the value of time of possession - the time cost of money or capital assets - since these patently involve no transfer of labor value.
&
Marx then offers an incredible sentence - a sentence that only an economic simpleton could write - or read and take seriously.

"If a definite quantity of labour, say thirty days, is requisite to build a house, the total amount of labour incorporated in it is not altered by the fact that the work of the last day is done twenty-nine days later than that of the first."

But without knowledge of the time cost of money and the time cost of productive assets, efficient management of productive assets is impossible. Wherever the time cost of money was not taken into account, socialist production would exhibit incredible ineptness.
&
And without the productive incentives of ownership interests, socialist production would become the plaything of a variety of counterproductive incentives. Diligence and those skills dependent on talent would frequently not be properly compensated in the absence of recognition of the value of scarcity. They thus would seldom be exercised in those instances. As for variety - it is unimaginable under socialism.

When exchanges take place, "the price realized may be abnormally above or below the value." Social labor value is the "hidden regulator" and remains ideally somewhere at the mean price level around which the forces of supply and demand cause prices to fluctuate. However, the ideal is not the reality, and even mean price levels differ somewhat from social labor value.

Somewhat inconsistently, Marx recognizes that social labor value must change in response to some of the influences that cause those price fluctuations - conditions of overproduction or underproduction - glut or scarcity. The price fluctuations provide the constant flow of sensitive signals that permit managers to rationally allocate scarce resources. The standard supply and demand curves in economics deal only with price, not with social labor value.
&
It is impossible to determine what "social labor value" is without guidance from the pricing mechanism, since conditions of glut or scarcity become long term rather than temporary without market guidance, and even mean pricing levels become so attenuated as to be meaningless for practical economic purposes.

Marx is, of course, aware of inflation and its affect on prices. Substantial new supplies of precious metals are flowing in from newly discovered mines - and the metal in the coins is being clipped or allowed to be worn away. However, for the purposes of this analysis, he reasonably assumes a fixed valuation for the monetary metal - as in the short run it generally has.
&

The seller who receives money may not necessarily expend it again - he may take it out of circulation - he may hoard it - producing "a crisis" if too many hold too much overly long.

3) Money is the medium of exchange. It is the measure of exchange value. Marx goes on in extraordinary length to show how the money commodity - as the medium of exchange - facilitates an endless string of transactions involving the purchases and sales of goods in commerce - "the circulation of commodities."

"Money functions as a means of circulation, only because in it the values of commodities have independent reality. Hence its movement, as the medium of circulation, is, in fact, merely the movement of commodities while changing their forms [from values to use values]."

But this string is not foreordained to continue.

"We see here, on the one hand, how the exchange of commodities breaks through all local and personal bounds inseparable from direct barter, and develops the circulation of the products of social labour; and on the other hand, how it develops a whole network of social relations spontaneous to their growth and entirely beyond the control of the actors."

Whereas, in barter, two different commodities are immediately exchanged for their use value to the new possessors, money breaks this necessary connection. The person who receives the money may not necessarily expend it again - he may take it out of circulation - he may hoard it - producing "a crisis" if too many hold too much overly long.
&

This process of "crisis" is explained by Marx in terms of his pseudo scientific gibberish - of "contradictions" and "thesis" and "antithesis" - by which he attempts to reduce the complex and inherently indefinite logic of economic analysis to a formulaic method with pretensions to scientific certitude.

"The antithesis between use-value and value; the contradictions that private labour is bound to manifest itself as direct social labour, that a particularized concrete kind of labour has to pass for abstract human labour; the contradiction between the personification of objects and the representation of persons by things; all these antitheses and contradictions, which are immanent in commodities, assert themselves, and develop their modes of motion, in the antithetical phases of the metamorphosis of a commodity."

At this point of the analysis, crisis is merely possible. Its inevitability is explained by analysis of further elements of the capitalist economic system.
&

Marx then gives his views on the velocity of money as currency, in another typical tediously long segment. His views, as with those of Adam Smith, depend on the money having an intrinsic value - as when it was based on precious metals. Thus, the amount and velocity of money in circulation is determined by the amount and prices of commodities. It is economic law "that the quantity of the circulating medium is determined by the sum of the prices of the commodities circulating, and by the average velocity of currency."
&
But this is only in the very short term, during which the value of the money is fixed. And it doesn't include the operations of the credit financing mechanism.

By his own terms, gold may have a lower social utility in Spain, which receives copious amounts of it from its mines, than in England, which must earn its gold with the export of commodities. It takes more labor to get gold into England. But also, as Smith points out, Spain's mercantilist policies keep gold supplies artificially high. In this way, even with gold, the amount of money can impact the price level - as well as the production - of commodities. Not just socially necessary labor, but relative scarcity as well, impacts value.
&
Even with gold - money matters.

Marx asserts that paper money can have no value unless it is pegged to gold or other precious metal.

Even when paper money is tied to gold, Marx asserts that it can circulate only within the state where it is enforced as a contract.

More to the point, the notion that paper money can function on the basis of scarcity alone - without any relation to a monetary commodity - is disparaged by Marx. "Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value."

Yes, inflation is inherent in the use of paper currencies - but it is inherent not because they have no relation to monetary commodities, but because governments - with their insatiable appetites for revenues - keep expanding the money supply faster than the economy can absorb it. Scarcity does affect value even without regard to its impact on the social utility of labor.
&
In predicting that fiat paper legal tender money will prove unsustainable, Marx makes his second major forecasting error of this volume.

Even when paper money is tied to gold, Marx states that it can circulate only within the state where it is enforced as a contract. "This compulsory action [as legal tender] of the State can take effect only within that inner sphere of circulation which is coterminous with the territories of the community."

But "hard" paper - and digital - currencies like the dollar, euro and pound now circulate worldwide - not just as transitory mediums of exchange, but also as monetary reserves and as reliable stores of value worldwide - based not on gold but on their status as legal tender with reliable claims on the produce of the issuing nations. This is the third major faulty fearless forecast for Marx.

Since the commodity still retains its original labor value, the gain by merchants is "surplus value." In terms of adding labor value to commerce, merchant transactions are meaningless.

These merchant transactions thus boil down to the exchange of capital for capital for more capital - the equivalent of trading money for money for more money - devoid of any addition of labor value to account for the surplus value this process produces.

However, merchant transactions - the purchase of commodities for resale at a profit - when successful - provides monetary gains and permits "interminable" transactions without any addition of labor value. Advancing money to gain money is mere speculation - a gamble. "More money is withdrawn from circulation at the finish than was thrown into it at the start." Since the commodity still retains its original labor value, the gain is "surplus value." In terms of adding labor value to commerce, merchant transactions are meaningless.

"The value originally advanced, therefore, not only remains intact while in circulation, but adds to itself a surplus value or expands itself. It is this movement that converts it into capital."

The object of the capitalist is not consumption, but constant gain.

"This boundless greed after riches, this passionate chase after exchange value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The never-ending augmentation of exchange value, which the miser strives after by seeking to save his money from circulation, is attained by the more acute capitalist by constantly throwing it afresh into circulation."

The commodities, themselves, are no longer viewed as use values, but as exchange values - just like money. Such commodities are capital - just like money. These transactions thus boil down to the exchange of capital for capital for more capital - the equivalent of trading money for money for more money - devoid of any addition of labor value to account for the surplus value this process produces.

Marx conveniently ignores the ways in which merchant transactions differ from commodity speculation. Marx to the contrary notwithstanding, goods in an accessible market are worth considerably more than goods on the manufacturer's loading dock many miles away. Were it otherwise, farmers markets would everywhere displace super markets.
&
The merchant trade of commodities as capital cannot be sustained at a profit if it doesn't deliver value by bringing those commodities most efficiently to the ultimate consumers in the market. The inability to efficiently deliver goods to the ultimate consumers would be one of the most distressing failures of socialist systems.

The industrialist and the creditor are not really any different from the merchant, even though the steps of the transaction are more complex in the former instance and more direct - money advanced to gain money plus surplus value - in the latter.
&
But for industrialists, Marx distinguishes between the "small master" who employs so few workers that he must himself actively engage in manual labor, and industrial "capitalists" who employ enough workers so that the surplus value that can be gleaned is enough to free him from the need for manual labor.
&
Here is one of several places in the book where Marx seems to acknowledge that the capitalist must in fact add entrepreneurial skills for best results. "That a capitalist should command on the field of production is now as indispensable as that a general should command on the field of battle."
&
The profit motive provides the incentive for efficient production, Marx recognizes - (and only the ownership interest has it). But to Marx, profits nevertheless add no value to production.
&

The merchant's markup "can only have its origin in the twofold advantage gained, over both the selling and the buying producers, by the merchant who parasitically shoves himself in between them."

Marx thus blindly - determinedly - denies that commerce adds value - again relying on the basis of faulty premises about what is and is not value. In the Marxist world, the retail buyer and the producers of commodities could just as easily have met in the market place without the intervention of a merchant and without adding the merchant's profit to the transaction.

That the producers of commodities might more efficiently have used their time producing their saleable commodities than transporting them to market and sitting around waiting for sales and returning with and storing the unsold inventory doesn't enter his feeble calculations in Volume 1. The time cost of money remains alien territory to him in Volume 1.
&
However, in Volume 3, when he deals with these subjects specifically, he is forced to recognize some of the many obvious benefits of these commercial factors. Nevertheless, he retains his view that they add no value - they just help in the process of "realizing" value already created by industrial labor power. He is reduced to relying on tautological reasoning and distinctions without a difference to sustain this central absurdity of his concepts.

As between the buyer for use and the seller for money, there is a zero sum game. No surplus capital can be generated, although one can take advantage of the other and by shrewd bargaining make a gain at the other's expense.
&
However, when the capitalist steps in between these two, he extracts value - surplus value - from them both. The merchant's markup "can only have its origin in the twofold advantage gained, over both the selling and the buying producers, by the merchant who parasitically shoves himself in between them." (All who sell and buy through merchants rather than direct must be stupid not to see this!)
&

The interest revenues of money lenders are even more blatantly parasitic, since they draw surplus value directly from one party in return for nothing of value - in terms of the standard of value of social human labor in the abstract - which Marx continues to invoke as the sole legitimate measure of value in order to reach this whole series of absurd conclusions.

With his "scientific" understanding of capitalist economics, Marx is thus obliged to again deny reality - to refuse to recognize the advantages for productivity and flexibility derived by capitalism from its sophisticated financing mechanism.

Wage Labor:

Wage labor is labor sold as a commodity - a phenomenon of the capitalist system.

Labor can also be sold like a commodity if sold for a particular purpose and time. If sold totally, it becomes slavery. The laborer must sell his labor because he lacks the implements and materials with which to produce for sale the commodities he produces for his employer.
&
That some should possess money and commodities while others possess nothing but their labor is not a natural phenomenon, but is a characteristic of the capitalist economic system. Wage labor is labor sold as a commodity - a phenomenon of the capitalist system.
&

The average exchange value of basic, unskilled labor power at subsistence wage levels sufficient to maintain the laborers and the families from which the next generation of laborers will come is referred to by Marx - as by Adam Smith - for his calculations. The acquiring of skills involves additional labor, and so has a higher value that generally commands a higher price, but which can be measured in terms of the undifferentiated human labor standard. (Try making such a calculation for yourself - without the assistance of market prices.)

"The value of labour power resolves itself into the value of a definite quantity of the means of subsistence. It therefore varies with the value of these means or with the quantity of labour requisite for their production."

Since laborers provide their labor for a period of time - a week or two or a month - prior to payment, the employer receives use value prior to payment.

Since laborers provide their labor for a period of time - a week or two or a month - prior to payment, the employer receives use value prior to payment. Laborers are thus obliged to extend credit to their employers. A bankruptcy can deprive them of their wages. Having no reserves, they are obliged to buy their immediate needs on credit or from high priced company stores.
&
Of course, since the means of production are provided for a period of time before laborers produce commodities and sales can be transacted, the employer is also providing credit to the laborer who in the meantime has the use of those assets.
&
However, this is not something Marx deigns to recognize. He denies any value to the time cost of money and the time cost of productive assets, since time is not a product of labor. The provision of productive assets to labor is just an "advance" for the productive process.
&
Capital not in use is "dead capital." Workers do the capitalist a favor by working with his capital and bringing it back to life. The benefit they bestow saves the capital from decline. Thus, only the time necessarily spent in labor counts. (Of course, labor without employment can be viewed as "dead labor" - which it can turn out to be literally as well as figuratively.)
&

The capitalist ownership interest has added nothing of value to the process, Marx again somewhat inconsistently asserts, since the costs of production include the costs of managers and supervisors.
&
Marx then claims that this process as he describes it in no way violates "the laws that regulate the exchange of commodities." This assertion is backed up by an extensive rationalization - detailed, repetitive and tedious - but nevertheless with the usual glaring omissions - in his usual style.

For all his ostentatiously careful detail, much is omitted. Among the most obvious omissions:

If profit were not an ordinary and necessary cost of production, then goods for sale at a profit would be priced out of existence in the market. As Marx earlier admits, producers who try to sell their commodities for more than labor value will find their customers going elsewhere and will eventually be left without compensation. Price can fluctuate - but it cannot remain above "value" on average more than temporarily.

Marx in fact expects profits to collapse - with disastrous consequences for capitalism - but only because of ruinous competition between profit-driven capitalists. But, of course, it never does happen because of capitalist processes such as creative destruction, and the development of new and improved goods and services - processes Marx is aware of but persistently - stupidly - underestimates. The signals given off by capitalist markets that limit and bar the permanent establishment of periods of overproduction are signals the value of which Marx and Marxists are determinedly ignorant of.
&
During the 19th century, cooperative nonprofit living was attempted hundreds of times by secular socialists, without a single success. There were even a few efforts that were well funded and run by people of demonstrated skill. Nevertheless, failure generally came within just a few years. Yet, all they had to do was to produce some product and undersell the capitalists in the market by the amount of the profit charged by the capitalists. Why did this prove to be impossible? Why does it still prove to be impossible?
&
Some sectarian cooperative efforts succeeded for impressively long periods - as much as a century - even when celibate. Yet Marxists nevertheless denigrate religion. They insist that religion has no real value - but religious cooperatives somehow succeeded in out producing all secular nonprofit cooperatives. Where are the productive values that accounted for this difference?

While Marx at one point suggests that the capitalist interest can be totally divorced from management and supervision, in a couple of brief instances - like the one quoted in the second paragraph of this segment, above - he lets slip his acknowledgement that it is the capitalist that supplies the care, management and supervision that makes the process work.

Who else but those with the ownership interest have the incentive to continuously exercise such care and skill? Who else has the incentive to carefully balance ambition and caution - risk and reward - to venture prudently into uncertain markets - to prudently risk what has already been earned on uncertain prospects for future gain?

Who else has the incentive to carefully monitor what the best means are to fulfill the needs of the public in the market? Certainly not a governing bureaucracy - even if made up of some intellectual elite.

It is blatantly obvious that entrepreneurship involves labor of a scarce and highly skilled type - not measurable in terms of basic labor. It only exists because of ownership incentives.

It is a rare entrepreneur, indeed, who can leave his ownership interests entirely in the hands of hired managers and supervisors. Even then, he has exhibited unusual skill in recognizing and utilizing such paragons of virtue.
&
The weaknesses and risks inherent in the total divorce of management from ownership interests even today plagues investments in public corporations. Without ownership incentives, the strongest economic incentives affecting managers influence them to milk assets - to avoid the unrewarding trouble of building assets - or even more than minimally maintaining assets - for the benefit of others after current management is gone.
&
Scandals involving managers milking public corporations have been common from the earliest days of capitalism to the present. Adam Smith was very pessimistic about the possibilities of success for such public corporations.
&
Most notoriously, these noxious incentives would become evident in nationalized industries like the oil industry of the old Soviet Union. Today, eastern Europe is littered with the bones of decrepit socialist industries, and Russia still struggles to recover from the deferred maintenance afflicting its oil industry.

But even absentee ownership interests serve essential purposes in capitalist production.

Who else provides the essential risk capital that absorbs the blows delivered by the winds of change? Who else engages in the financial markets that send signals without which even the most skilled managers cannot efficiently function? Who else - by purchase or sale of shares - imposes effective discipline on management that - however imperfect - is available in no other way? Who else creates the profit system without which even the most skilled managers cannot efficiently function? See, Profits and capitalist productivity.

Again, there is the glaring failure to recognize the value in such things as entrepreneurial skills, scarcity, honor and reliability, and the time cost of money and of productive assets. Marx tries to make a joke of these factors - disparagingly calling them "imaginary" values - but they would prove to be no joke to the socialist experiments - both private and nationwide - that failed to take them into account.

But of course, Marx has to ignore such factors. They are the very essence of the system of capitalist production. Marx is engaged in constructing a propaganda myth justifying the destruction of such factors. Success for Marx is measured by the number of credulous people whom he can convince that economic productivity is not materially enhanced by such factors. Thus, their loss costs nothing, and indeed productivity can be increased by the reduction in costs attributable to profits - by the reduction of "surplus value."
&
He will find no shortage of such credulity, since this is the core belief of all socialists.

Propaganda magic:

On these faulty premises, Marx will perform his great magic trick - and make economic reality disappear from before the eyes of his true believers.

On the basis of such faulty premises, Marx thus goes on for hundreds of pages drawing his absurd conclusions about surplus value. They are absurd not just for their weaknesses of logic, but also because of the obvious manner in which they are divorced from reality. The errors are numerous and obvious - for those with eyes to see.
&
Indeed, he has now created the premises - faulty as they obviously are - on which he will perform his great magic trick - and make economic reality disappear from before the eyes of his true believers.
&

Unused capital is dead capital, and constantly depreciates. Workers do the employer a favor by working with his assets - bringing them back to life - and providing the wherewithal for their maintenance.

Marx must disparage the capitalist's role as provider of the tools and wherewithal of production if he is to achieve his propaganda purposes. So, he turns this activity on its head, and instead emphasizes the employee's role in providing the wherewithal - the use-value of his labor - to maintain the capitalist's capital. Unused capital is dead capital, and constantly depreciates. Workers do the employer a favor by working with his assets - bringing them back to life - and providing the wherewithal for their maintenance.
&
Our poor exploited laborer is thus not only made to work long enough to provide profit for the employer, but to make a "gift" to the capitalist of enough labor - providing use-value to the capitalist - by which the values of productive assets are incorporated into the produced commodities sufficiently to cover maintenance and replacement of working capital.
&
Moreover, physical productive capital does depreciate over time - even without use - after all, Marx acknowledges (while still refusing to acknowledge the time cost of money and assets). The laborer not only produces enough to maintain himself and his family, but also to maintain all of the capitalist's productive assets that have depreciated when not in use - and to cover non-industrial processes like purchasing offices, sales offices, clerks and bookkeepers and all the other overhead operations. This, too, thus becomes a part of "surplus value."
&
Marx is not exactly consistent in what labor adds or does not add value. At the end of Volume 3, we learn that bookkeepers are very important. Indeed, in communist systems, they will be extremely important, since it is they who will have to evaluate and keep track of all these indeterminable "values" that will supposedly govern the communist system. Once the capitalist system is superseded, bookkeeping processes on a vast and complicated scale encompassing the ascertaining of "values" "becomes more essential than ever."

You bet it does. It becomes a mission impossible - even as systems of administered pricing. Without money and a pricing system, it is indeed impossible.

Financial capital is eaten away by fixed costs - taxes, rents, ongoing costs of maintenance of physical assets - after all, and the laborer produces enough to cover these costs so that the capitalist's financial capital can be maintained.
&

But there is no "value" but labor and commodities, according to the premises established "scientifically" by Marx. Of course, with faulty premises we get absurd results. The provision of productive capital provides no "value" to the productive process except for the materials consumed and the minute values lost in the actual wear and tear of production - all of which, after all, are commodities consumed in the production process.
&

Then, Marx takes his rationalizations even one step further. The materials consumed and the minute values lost in the wear and tear of production are referred to as "constant capital," since as commodities, their value is fixed. Only the laborer adds new value, so this labor power is termed "variable capital," although Marx must admit that as a practical matter it is as "constant" as the other factors of production.
&
Not so coincidentally, these two terms - "constant" and "variable" - have meanings in mathematical reasoning - permitting Marx to perform more magic. This time, Marx elevates form over substance in order to play some games with the misapplication of mathematical reasoning. (Well, if economics is "science," it should conform to mathematical forms of reasoning, shouldn't it?)
&
With some simple mathematics, Marx here makes even the consumed capital disappear as a contribution of the capitalist.
&
The laborer's efforts in the spun yarn example have produced not only enough to provide for the subsistence of himself and his family and the surplus value for the employer's profit, they have also transferred to the commodities being produced the consumed values from fixed assets and consumed materials. Thus, as a matter of mathematical logic, equal "constant" values appear on both sides of the equation, and may be canceled out in simple mathematical calculations, leaving only labor - the "variable" in the equation.

"[Thus], we know that surplus value is purely the result of a variation in the value of - - - that portion of the capital that is transformed into labour power; - - -. Therefore, in order that our investigation may lead to accurate results, we must make abstraction from that portion of the value of the product, in which constant capital alone appears, and consequently must equate the constant capital to zero or make c=0. This is merely an application of a mathematical rule, employed whenever we operate with constant and variable magnitudes, related to each other by the symbols of addition and subtraction only."

What could be more reasonable? Unfortunately, you don't calculate percentages in this manner. Percentage "rates" are not calculated by means of just "addition and subtraction only."

With this metamorphosis of economic concepts into mathematical concepts by means of sly definitions, Marx proudly reduces his example by the amount of the £410 worth of consumable capital. This leaves the £90 paid for the labor that produced the surplus value of which £90 is an increase in the capitalist's total capital - a profit in the yarn example - which Marx here refers to only in terms of the broader concept of surplus value.
&

After the mathematical cancellation step, surplus value - with its much higher "rates" - can substitute for profits when it comes to analysis of capital accumulation.

This now meaningless figure has obvious importance for propaganda purposes. Marx thus gives it a special designation - "the rate of surplus value" - and uses it as a measure of "exploitation." After all, as Marx repeatedly notes, the rate of profits - unlike the rate of surplus value - is calculated against all the capital involved - resulting in much lower rates - just 9% in the yarn example - not nearly as useful for the propaganda purpose of emphasizing "exploitation."

"[If] there were branches of industry in which the capitalist could dispense with all means of production made by previous labour, whether by raw material, auxiliary material, or instruments of labour, employing only labour power and materials supplied by nature, in that case, there would be no constant capital to transfer to the product. This component of the value of the product - - - would be eliminated, but the sum of £180, the amount of new value created, or the value produced, which contains £90 of surplus value, would remain just as great as if [constant capital were] the greatest value imaginable." (Since Marx stated in his example that the £90 served to increase the capitalist's total capital, it was not just "surplus labor," it was "profit.")

Unfortunately for this line of reasoning, in the real world, the amount of capital required impacts the ability and willingness of new capitalist competition to enter the market. Where no capital expenditures are required, all increase in capital is not just "surplus value," it is "profit." But, where there is little or no capital required, competition is notoriously fierce, and profits minimal. Without capital, all surplus value, too, would be attributed to profit - and would be minimal.

Marx repeatedly insists that it is "the production of surplus value" that is the "compelling motive" of capitalist activity. This is clearly absurd.

Of course, although profit is surplus value, surplus value is not necessarily profit. Marx tries to equate the two concepts by redefinition of "profit," but we do not need to get to that until the articles on Volume 3. It is the single digit and low double digit profits that are the only benefits that provide capitalist incentives. The triple digit "benefits" of surplus value are illusory - the product of a fevered ideological mind.
&
Despite the 100% and higher rates of surplus value, how come nobody wants them in the absence of profits? Clearly, it is these "surplus" values that are the real "imaginary" values. Without profits - or at least the prospect of profits - capitalists routinely abandon their productive assets or sell them for salvage rather than strive for such "benefits."
&
The profit incentive to maintain capital assets is insanely of no value to Marx. Failure to properly maintain assets would bedevil socialist and communist systems throughout the 20th century.

But with the mathematical trick of canceling out from his calculations both the consumed capital and the commodity values that replaced it, Marx is left only with surplus value that is profits. This allows him to have his cake and eat it too.
&
"Surplus value" is not confined to "profits" but includes all costs other than for wages, productive consumables and wear and tear of equipment. In the spun yarn example, there are no other such costs. Thus, after the mathematical cancellation step, surplus value - with its much higher "rates" - can substitute for profits when it comes to analysis of capital accumulation.

Karl Marx: "Capital (Das Kapital)"	Volume 1, Part II: "Contradictions in Capitalist Industrialization."	Volume 2, Part III: "The Circulation & Expansion of Capital."
Volume 2, Part IV: "Criticism of Adam Smith."	Volume 3, Part V: "Profits."	Volume 3, Part VI: "Interest, Rent & Labor Use-Values."