November 1980 issue of the Socialist Standard
At the moment output is falling, unemployment is growing, prices are rising all things that no one wants to happen, but which nevertheless do. What this means is that the human social activity of producing and distributing wealth is not under the conscious control of human beings. They do not control the conditions under which they produce and distribute wealth but, on the contrary, are subject to laws which, while not themselves laws of nature, operate as if they were, as an external force governing human activities. Economics is precisely the study of “the laws” which govern human activity in the field of wealth production and distribution.
An important point must be made straight away: economic laws only come into operation under certain social circumstances—when, in fact, the production and distribution of wealth is not under conscious social control. When, as today, the means of production are monopolised by a section only of society and are used to produce wealth to be sold on a market with a view to profit. In other words, economic laws are the laws of capitalist production and they will not operate when capitalism has been abolished through the establishment of socialism (when production will be for the direct use of the whole community). This is why we said that these laws are not natural laws.
To say that they are would be to assume that capitalism was the natural form of human society. Which is the mistake made by the early theorists of economics or “political economy” as it was then called, such as Adam Smith and David Ricardo who Marx criticised for doing so. Indeed this is what Marx’s Critique of Political Economy (the title of a book he published in 1859 as well as the sub-title of Capital) basically amounts to. Nevertheless, as long as capitalism exists, these laws exist and operate just like natural laws; they govern human activity in the field of wealth production and distribution and act as external constraints on what humans can do.
An understanding of these laws is very important; it is in fact a basic part of our case since it leads to the conclusion that capitalism just cannot be reformed so as to serve the common interest and therefore must be abolished if today’s social problems are to be solved. Our interest in economics is simply to understand how capitalism works, and not at all to recommend policies for governments to pursue. This is an important point since “economics” and “economists” today are regarded, and regard themselves, as policy advisers.
How, then, does capitalism work? The man who first analysed this in an adequate way was Karl Marx in his work Capital, first published in German in 1867. He wrote a number of other works on economics too, but the best introduction is the talk he gave in 1865 which was published after his death under the title Value. Price and Profit (also known, in some reprints, as Wages, Price and Profits). As far as economics is concerned, we are Marxists as Marxian economics is an integral part of our theory.
If you look at the way capitalism works, the first thing that strikes you is that everything is bought and sold. Goods are all produced to be sold and nobody can get what he wants or needs except by buying it. Capitalism, then, is a buying and selling society in which wealth takes the form of an immense accumulation of items for sale, or commodities. This is why Marx begins his analysis of the capitalist mode of production by examining the commodity. A commodity is not simply an item of wealth, something useful; it is an item of wealth that has been produced for exchange, for sale. Commodities were of course also produced before capitalism existed, but in the past were only a secondary feature. Capitalism is the commodity society par excellence, where everything, including the mental and physical energies of human beings, is bought and sold.
Commodities exchange with each other in fixed proportions and Marx set out to discover what determined the exchange-value of a commodity, what determined, in other words, the proportions in which they exchange one for another. He came to the conclusion that the exchange-value of a commodity was determined by the amount of socially necessary labour needed to produce and reproduce it. This Labour Theory of Value is the basis of Marxian economics and without a knowledge of it it is impossible to adequately understand the other aspects of capitalist economic life such as money, prices, the rate of profit and crises.
This theory is explained in the pamphlet Some Aspects of Marxian Economics which we have just published and which is available for 40p from our Head Office, 52 Clapham High Street, London SW4 7UN.