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On Exploitation, Concentration and Centralization , from A People’s Guide to Capitalism, Haymarket Books

A Marxist View of Current Events

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Where does profit come from? Why Do Marxists say that workers are exploited?

“Rather than being cunning in the market, the key to surplus value (the basis of profit — S.L.) is a production process that creates more wealth than it began with…It is created argued Marx, within “ the hidden mode of production..” The secret hidden within the production process lies in a special commodity of LABOR-POWER — the ability to work. The ability to work has become a commodity under capitalism, which the capitalist buys in exchange for a wage (its exchange-value).

The exchange value of labor power is paid out in a wage. But the use-value of labor-power is labor itself — the source of value…What’s more, the exchange value of labor- power, and the value that labor then produces for the bosses, are two very different things. The worker is paid one thing, but will then normally create much more value during the shift than she is paid. The key to this golden egg arrangement for the boss is an agreement in which your labor is put under his control for a set amount of time, and you are paid for this time, not the fruits of your labor. Thus, your paycheck is worth the exchange-value of your labor-power. But the use-value of your labor-power is the production of greater value.

Let’s say you work for Starbucks and they pay you $120 for an 8-hour shift. But you can probably make $120 worth of fancy coffee in an hour…Even once you subtract the cost of the materials and use of the equipment, Starbucks doesn’t pay you anywhere near the value you’ve created (hundreds of dollars a day) They buy your labor-power from you, not the actual fruits of your labor. And you make the value of your wage for the day by working one hour for them. The rest of your shift you’re basically working for free! The extra labor they extract from you is called SURPLUS LABOR..the surplus labor is the free labor that the capitalist benefits from during the rest of your workday.”

That surplus labor is the basis of capitalist profit.

Key Takeaways from A People’s Guide to Capitalism Chapter 5: The Accumulation of Capital

In this chapter, the author asserts that in order to survive, capitalists must grow, or increase their market share, by lowering prices. To lower prices, they need to invest in labor-saving, cost-cutting technology to produce goods more cheaply than the competition. Capitalist growth has led to colossal corporations and a widening wealth gap. Large companies determine pace, pricing, and establishment of new markets.

Marx defined the concentration of capital as the process of an enterprise growing through time, by way of accumulation. The bourgeoisie refers to this process as “organic growth” which sounds benign but is only accomplished through exploitation and theft of labor. For example, from opening its initial store in 1962 through the year 2003, Walmart opened 3,176 stores and became the largest retailer in the world. Yet Walmart workers make nearly 15% less than other low-paid retail workers, many on food stamps and lacking healthcare. Such growth is accelerated by the use of capital markets — credit and financial structures like stocks and bonds. Global capital markets are worth hundreds of trillions of dollars, and their rise has vastly accelerated the process of concentration under capitalism.

Marx also defined another important mechanism of growth under capitalism. Centralization of capital is the process through which industries come to be dominated by fewer and larger enterprises through consolidation. It is the concentration of capitals already formed, from many small ones into few large capitals. Already existing capital shifts hands through debts, mergers, acquisitions, and cutthroat competition. Companies that don’t make it face bankruptcy and can be bought up on the cheap by rivals. For example, Google has acquired hundreds of firms, averaging about one acquisition per week. (i.e. Android, YouTube, Picasa, Waze, etc.) Thus, the idea of the free market is a myth, as corporations really compete to dominate a market entirely so they no longer have to compete at all. The only way capitalism still maintains any dynamism is through innovation (i.e. Tesla, Airbnb succeeded despite existing giants).

The author explains that concentration and centralization are not by-products of accumulation, but drivers. Centralization supplements accumulation by enabling capitalists to scale. Rather than create capital slowly through accumulation and wait for growth, capitalists can just reorganize the groupings and continue growing rapidly. It also creates further advantages for the largest corporations, which can more easily cheapen the cost of production through collectivization, assembly lines, de-skill-ing of work, and supervision. Larger numbers of laborers are more efficient than individual laborers. For larger companies, once the core expenses (renting space, buying equipment) are paid, the difference in producing 10x the goods does not incur 10x the cost. Costs also drop as production rises because technological investments are spread out over a greater number of units of output. Larger companies can also secure credit with low-interest rates from banks. Finally, during periods of shrinking markets, larger companies can weather the storm and even profit — They can carry debt for longer, close less profitable branches, diversify their investment, offer discounts, and buy failed companies.

Another key takeaway from this chapter is that monopolization is inherent to capitalism: It turns a cut-throat industry into a profitable one with lower competition, greater pricing power, stronger leverage over suppliers, etc. Pricing power is a euphemism for price gouging, or giving consumers limited choices. For example, airlines charge for every little privilege, while pharmaceutical companies charge as much as they can get away with. The 10 largest pharmaceutical companies control ⅓ of the market, making $10B/year, and spending only 15–20% to fund more research. Other countries have nationalized healthcare to negotiate prices for everyone, but Medicare is barred from negotiating drug prices. Both Democrats and Republicans have upheld a system in which they have no regulatory power. Obama bailed out the banks in 2008 with billions of dollars while average Americans lost their homes. Why? Once an institution is so big, its collapse threatens the whole system’s stability. This “too big to fail” aspect of monopolization holds taxpayers hostage without holding capitalists accountable.

Ultimately, monopolies lead to a fusion of interests of capital and the state. States manage the corporate interests of the ruling class both domestically and abroad. At home, the state helps out corporations through bailouts, subsidies, and loans. Internationally, through imperialism — trade agreements, politics, and military force. Corporations are reliant on the state to beat down barriers abroad, for example by threatening less investment in the EU if they sue Apple for tax evasion. As Thomas Friedman said, “The hidden hand of the market will never work without a hidden fist.”

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A Marxist View of Current Events

Steve Leigh is a member of Seattle Revolutionary Socialists and Firebrand, national organization of Marxists, 50 year socialist organizer. See Firebrand.red