Lecture 3 Capital and labor power 1 The

Lecture 3. Capital and labor power 1. The transformation of money into capital. 2. The labor power as a commodity. 3. The labor-process and the process of producing surplus value. 4. The essence of the capital. Constant capital and variable capital 5. The rate and the mass of surplus-value 6. Modes of surplus value production 7. The stages of labour division in condition of capitalism

Glossary of terms • Labour-power – рабочая сила • The use-value of labour-power – потребительская стоимость рабочей силы • The value of labour-power – стоимость рабочей силы • Necessary working time – необходимое рабочее время • Necessary labour – необходимый труд

Glossary of terms • Surplus working time – прибавочное рабочее время • Surplus labour – прибавочный труд • Surplus-value – прибавочная стоимость • Capital – капитал • Constant Capital – постоянный капитал • Variable Capital – переменный капитал

Glossary of terms • The Rate of Surplus-Value – норма прибавочной стоимости • The Mass of Surplus-Value – масса прибавочной стоимости • Degree of Exploitation of Labour-Power – уровень эксплуатации рабочей силы • The absolute surplus-value – абсолютная прибавочная стоимость

Glossary of terms • The relative surplus-value – относительная прибавочная стоимость • The excess surplus-value – избыточная прибавочная стоимость • Simple capitalist co-operation – простая капиталистическая кооперация • Manufacture – мануфактура • The Factory – фабрика • Technical progress – технический прогресс

The transformation of money into capital • Historically, capital emerges in the form of monetary wealth of merchants and usurers of the slave era. However, even in this early form capital formation differed from the simple accumulation of money in the form of treasure. • Thus, not every accumulated money is capital • Money transforms into capital only as a result of their use for profit, by which they self-grow.

The transformation of money into capital To understand the process of money transformation into capital we should compare the formula of the simple commodity circulation and general formula for capital: Simple commodity circulation formula C–M–C General formula for capital M – C – M‘

Common features: • 1. Both formulas fall into the same opposite phases - buying and selling. • 2. Both formulas include the same material elements - commodities and money. • 3. Each scheme is carried out by three people, one of which only sells, another - purchases only, and the third - buys and sells.

Differences: 1. The inverse sequence of buying and selling. 2. Different goal of each scheme: In formula C-M-C - the aim is to get a new use -value. In formula M-C-M‘ - the aim is profit. 3. In the first case money is simply spent and lost forever. In the second case – money are advance and return back with growth.

Differences: • Formula C-M-C – does not contradict to LV– exchange is done according to equality of values : С=M, M=C, C=C. • Formula M-C-M‘ – contradict to LV – because sum of money received in the end of circulation is higher than initially advanced: M=C, C=M‘ but M‘≠M, because M‘ = M + m, where m – surplus value.

Source of surplus value • So, capital – is self-grow value, or value that creates surplus value. • There is a question: what is the source of surplus value? • Source of surplus value is in specific commodity, which in the process of labor can create new value which is higher than its own value. • Such specific commodity is labor power.

Contradiction of general formula for capital (GFC) • When we investigate GFC one more question appears: where does surplus value appear – in the circulation process or out the circulation process? • Contradiction of GFC is that surplus value doesn’t appear in the circulation process, but it can’t appear out the circulation process.

Solving of the contradiction • Surplus value is created by labor power in the process of production, but realized on the market in the process of circulation.

Labor power as a commodity • Labor power (LP) – is ability of person to work. • Labor and labor power aren`t the same things. Labor is physical and mental activity of a person. Labor power is just ability to work. • All people has ability to work but only in particular conditions it become a commodity.

Conditions of LP transformation into commodity: • 1. Personal independence of people who are owners of their LP. • 2. Owner of LP shouldn`t have means of production and means of existence. That is why he is ready to be a hired worker. • 3. It should exist a class of people - owners of means of production - who are ready to use LP in the process of production.

Properties of LP • As any commodity LP has two properties: value and use value. • Value of LP is determined by the value of all means which are necessary for existence of laborer and his family. • Use value of LP is determined by ability of worker to create a value which is higher than it’s own value – surplus value.

The labor-process and the process of producing surplus value. • The labor of workers in the production process has two-fold character. • With its concrete labor workers change usevalues of means of production and create new use values. Means of production value (c) is transferred to a final product by concrete labor of workers. • In the same time with its abstract labor workers create new value, which is a sum of equivalent of labor-power value and surplus-value (v + m).

The labor-process and the process of producing surplus value. • Capitalist advanced 200$ for means of production (c) and hired 40 workers. Their total value of labor power (v) is 200$ in a day. Each worker creates 1$ of new value in 1 hour. The length of working day is 5 hours. • Commodity value (w) in these conditions is: 200$c + 1$(v+m)*5*40 = 400$

The labor-process and the process of producing surplus value. • After selling the commodity on the market capitalist will receive 400$ and has to: • recover value of means of production - 200$; • recover value of LP - 200$. • In this case capitalist won’t receive profit. But such result can’t satisfy the capitalist, so he continues the working day up to 10 hours.

The labor-process and the process of producing surplus value. • For the next 5 hours capitalist advances 200$ for means of production (c) again and uses labor-power (v) of the same 40 workers. They create 1$ of new value (v+m) per 1 hour. • So, value of commodity consists of: 200$c + 1$(v+m)*5*40 = 400$

The labor-process and the process of producing surplus value. • After selling the commodity on the market, capitalist has to reimburse $ 200 of means of production value. • But he shouldn’t again recover the value of labor-power, because it has been done already in the morning. • So, 200 $ of (v + m) capitalist receives in the form of surplus value (m).

Value of commodity • So, value of commodity is: W = c+v+m • • C – transferred value of means of production V – equivalent of LP value m – surplus-value Surplus-value – the value created by hired worker above the value of his labor-power.

Working day • The working day on capitalistic enterprise consists of 2 parts: necessary working time and surplus working time. • In necessary labor time hired worker creates an equivalent of its LP. Labor spent in NLT is necessary labor • In surplus labor time hired worker creates surplus value. Labor spent in SLT is surplus labor.

Working day and its limits • t nec. t surpl. • Working day has 2 limits: physical and social. • Physical limits - is time, which hired worker needs to satisfy his physical needs. • Social limits - is time, which hired worker needs to satisfy his spiritual and social needs.

Capital • Capital – is self-grow value or value which creates surplus-value. • But different parts of capital play different role in surplus-value creation that is why constant (с) and variable capital (v) are differed. K = c+v

Constant capital • Constant capital (c) - the part of the capital that exists in the form of means of production, the value of which isn’t not changed in the process of production and transferred to the final product by concrete labor of workers.

Variable capital • Variable capital (v) - the part of the capital spent on labor-power, which in the process of production changes its value and creates new value (v+m).

The rate and the mass of surplus-value (SV) • Мass (m) – is absolute magnitude of SV. • Rate (m‘) – is relative magnitude of surplusvalue – ratio between mass of SV and variable capital (v) m‘ = (m/v)*100%

The rate and the mass of surplus-value (SV) • Since the SV is created in SLT and equivalent of LP – in NLT, the formula of m‘ can be presented as : m‘ = (tsurpl. /tnec. )*100% • Rate of surplus value shows us: • Efficiency of variable capital functioning • The rate of exploitation of LP by capitalist

Modes of surplus value increase: • 1. Absolute m • 2. Relative m • 3. Excess m

Absolute m • - m received as a result of absolute lengthen of the working day beyond the necessary time or as a result of intensity of labor increase • . • tnec tsurpl 1 tsurpl 2 tsurpl 3 … • 4 h. 2 h. . . . • Absolute surplus value production was used on earlier stages of capitalism development (Western Europe in ХVІІ-XVIII ct. ).

Relative m • - m, received as a result of surplus time increase and necessary time decrease in the framework of constant working day. • tnec 1 4 h. tsurpl 1 4 h. • tnec 2 3 h. tsurpl 2 5 h. • Production of relative take place as a result of labor productivity increase in the braches which produce means of existence for workers and means of production for means of existence production.

Excess m • - m, received by capitalists which have improved technology and organization of production in the framework of their enterprise. • It can be counted as a difference between socially necessary and individual commodity value. • When new technologies become available for all enterprises, socially necessary value decreases so excess m disappears. As a result capitalist try to renovate technologies again to receive excess m.

The stages of labour division in condition of capitalism(self study) • 1. Simple capitalist co-operation • 2. Manufacture • 3. The Factory