The Economic and Philosophic Manuscripts of 1844 are basically Marx's first shot at critiquing bourgeois political economy.
There are three manuscripts. Only the last four pages of the second survive. The first manuscript integrates rather a lot of bourgeois political economy, so this only represents thoughts of early Marx and not the apex of Marx.
All three manuscripts are mainly about estrangement of labor and alienation of the laborer in capitalist society.
"Estrangement" and "alienation" refer to "the appropriation by the capitalist of the product of a worker's labor" and "the separation of the worker from the means of production" which essentially functions as an enslaving power to the worker.
Marx shows that the more wealth a worker produces, the poorer they become. He further claims that this will inevitably lead to revolution, then to workers' emancipation, and, by extension, "universal human emancipation".
Wages are the product of struggle between the capitalist and the worker. However, the capitalist always wins due to the fact that the capitalist is much less dependent on the worker than the worker is dependent on the capitalist.
Furthermore, capitalists are allowed to group and collectively make decisions to further their interests. The same cannot be said for workers (e.g. workers' unions).
Workers usually only has a singular source of income: industrial income, while landowners and capitalists have additional sources of income such as ground-rent and interest on capital to sustain themselves.
This is the source of competition among workers. This puts them in a unique (and precarious) position: workers only have their labor to subsist off of, as they do not own capital and landed property. It is, in this sense, "fatal" to the worker.
The only necessary wage for a capitalist to pay a worker is the lowest: that which is sufficient for
the subsistence of the worker for the duration of their work and
additionally, the subsistence of their family, in order to maintain a sufficient reserve of workers.
The ordinary wage, according to Smith, is the lowest compatible with common humanity (that is a cattle-like existence).
It's logical to consider "men" as a commodity itself that is produced to various degrees.
If the supply of men greatly exceed the supply, the "extraneous men" become poor, homeless, and starving.
So, first, in the event of a worker surplus, wages are pushed down by virtue of the market.
Secondly, when profit (price-profit) or rent (ground-rent) take a hit, the effect is usually propagated to wages because workers have the least bargaining power.
The worker is effectively a commodity that must search for a buyer. The worker's life depends on the rich and capitalists.
The more unemployed people there are, the more capitalists are able to keep wages low.
Division of labor (DOL) makes it difficult for workers to switch gears into a different industry. They are confined to some particular branch of labor.
Capitalists don't have this problem quite as much. They can redirect their capital to produce products in another industry on a whim. Workers are subordinate to the demands of the capitalist.
Since the worker is subordinated to purchase by capitalists, the worker is set up to lose the most in the case of a surplus of workers or a market downturn.
Fluctuations in the market affect rent less than profit, and profit is affected less than wages. Marx presents wages as zero-sum, where a rise in one wage is most often accompanied by a fall in some other.
Workers do not necessarily gain when the capitalist gains, but workers necessarily lose when the capitalist loses.
Wages go up because workers need more money for basic necessities. However, wages also go down because demand for labor drops; businesses struggle with high costs. Nothing changes.
When food is cheap, wages go up because businesses need more labor. However, wages also drop because the cost of living is lower, so capitalists can get away with paying less. Nothing ever changes.
In any case, some workers are paid below what they need and they live in poverty.
Between different occupations and kinds of labor, there are huge differences in wages due to extremely hard-to-control factors such as where the worker was born, their education, whether their job is "valued" by the market, etc.
Profit is relatively stable and predictable regardless of the industry. Capital (money-capital included), really doesn't care. If you're smart about it, it just sits there and increases, it reproduces and multiplies.
Not only that, when they have a job, the worker has to struggle for their subsistence. When they don't have a job, workers have to struggle for a job.
The worker suffers the most, for reasons we've already outlined.
This seems good for the worker. Competition between capitalists sets in, demand for workers is higher than supply.
Furthermore, rising wages create overwork, since "the raising of wages excites in the worker the capitalist's mania to get rich, which they, however, can only satisfy by the sacrifice of his mind and body". This shortens the lifespan of workers, and this is favorable to the working class because supply of labor needs more maintenance. As Marx writes, "This class has always to sacrifice a part of itself in order not to be wholly destroyed".
1. Increasing surplus value extraction. This is possible through the accumulation of labor. Since labor is capital, thus the accumulation of capital. Workers are being isolated from the products of their labor at ever-increasing rates. Workers' reliance on capitalists increases.
2. DOL feedback loop. The more capital is accumulated (capitalists reinvest their profits), the more businesses push for division of labor (to maximize productivity). Division of labor, in turn, increases the number of workers needed because jobs are fragmented and more people can be slotted into the system. Marx also writes that the worker is "depressed spiritually and physically to the condition of a machine". Competition between workers then increases and wages drop.
3. Top capitalists no longer have to bother. As society gets richer, only the ultra-rich can afford just living off interest. Every other capitalist has to actually put their money to work by running businesses (business owners) or trading (small-time investors). Competition between capitalists then heats up.
Capitalist competition. However, competition in this game is by no means fair. Well-established capitalists crush the little guys through more resources, better economies of scale, and can afford to operate at a loss to sabotage competitors. Small capitalists lose everything and fall back into the working class. No more capitalist competition.
Wages drop even further. More workers means less wages means more competition. More dependence on the few surviving mega-capitalists. If you don't have enough wealth to escape the gravity of the working class, you get sucked back in. More workers also means more people falling into poverty and destitution.
The outcome of this system for the worker is "overwork and premature death, decline to a mere machine, servitude to capital piling up against them, more competition, and more poverty".
In short:
More wages = more capital accumulation, which is used against the worker.
More division of labor = more machine-like labor and dependence on the capitalist, increasing worker competition and even competition with machines.
More capital accumulation = more industry = more workers, meaning overproduction and either increasing unemployment or decreasing wages.
And, mind you, Marx notes that this is the best outcome for the worker: a society of growing wealth.
What happens when wages are so low they're insufficient for the number of workers in the market?
The surplus workers die. Literally.
Marx sums it up as follows:
In a declining society (e.g. economic collapse, crisis, war), worker misery increases.
In a thriving society (e.g. industries expanding, wealth creation, capital accumulation), workers suffer in more "complicated" ways as described above.
In a stagnant/peaked society, worker misery becomes static.
According to Smith, a society is not happy. Most people suffer. Marx states that even the wealthiest state of society leads to most people suffering. Since the goal of the economic system is this wealthiest state, Marx contends that part of the goal of the economic system is the unhappiness of society.
The capitalist is usually unaffected by worker wage increases, since they find ways to cut labor time (decrease total payout), increase efficiency, automate tasks, or push workers harder. The worker might have higher wages, but they're likely doing the same amount (or more) of work in less time, meaning their gains are practically zero.
When wages go up, prices of goods rise linearly (like simple interest). But when capitalists demand a higher return on investment (higher interest on capital), that stacks up like compound interest due to reproduction of capital, meaning it accumulates way faster than wages ever could.
Capitalists are cranking up profits exponentially while workers play a slow, losing game.
The political economist claims that, in theory, the product of labor belongs to the worker. In reality however, the worker only really gets what is necessary for
their existence not as a person, but as a worker, and
"the propagation, not of humanity, but of the slave-class of workers".
In theory, everything is bought with labor, and capital is just accumulated labor. Implicitly, workers should be the real owners of everything, since they are the source of labor. In reality however, the people who actually do the labor don't get to enjoy the wealth they generate. They're handing over autonomy, creativity, and dignity. Their obedience, time, and the right to control their own lives.
In theory, labor is sacred, but in reality, capitalists keep dangling the carrot on a stick and ensuring that laborers themselves remain moneyless and powerless. While landowners and capitalists sit on their asses collecting wealth like they're only responsible for the maintenance of the money-machine, workers, who supposedly create all value, barely make enough to keep their families alive. The people who do the least get the most, and the people who do the most get nothing but misery.
In theory, labor has the most constant measure of value, but in reality, wages have the greatest fluctuations out of any exchange.
In theory, the interests of the worker are never in opposition with society, because
even if wages go up, it's supposedly "balanced out" by reducing labor time and other adjustments.
when looking at society as a whole, there's no real distinction between "gross product" and "net product" (the profit that remains after wages and costs).
Here's Marx's line of argument:
First, he identifies the usual story as saying that "wages are what's left after rent and profit are taken out", like capitalists "deduct" their share from revenue.
This is backwards. The worker doesn't start with 100% of the wealth and then have pieces taken away. The capitalist starts with all of it and wages are just a small fraction they allow the worker to keep so they don't drop dead before the next shift.
When society is falling apart, the worker suffers the most, because they're already living on the edge. They have no safety net, no reserves, no passive income, just their labor, which is the first thing to be devalued. This is a general burden in living in society, but the specific misery of the worker comes from their dependence on labor.
Even when society is improving, the worker still gets screwed. The wealth they create doesn't liberate them, but in fact exacerbates their exploitation. The more production, the more surplus value, the more of an asset they are to capitalists.
When society reaches peak wealth, the worker is trapped in a state of "frozen misery". Endless work, never moving up, surviving without living.
It's interesting how, here, Marx used the word proletarian for defining the whole human being of the worker, even outside of work. Political economists only consider workers as cogs in the machine, not remotely as human beings outside of the work they do.
When the worker isn't working, they become someone else's problem. The legal system watches them like a potential criminal. Doctors patch them up if they're broken. Religion tells them to accept their suffering and provides them with meaning. Statisticians reduce their misery to numbers. Politicians throw them slogans and something to care about, even if it's fake. And when none of that works, they're dumped in the poorhouse or prison.
There's no space for the worker as a person. It only acknowledges them as long as they're profitable. The moment they aren't, they're either ignored or discarded.
Marx proposes to answer two questions that political economists got so close to articulating:
What's the historical significance of turning people into pure economic units? (reduction of humanity into abstract labor, labor stripped of individuality, an input measured in hours, productivity, and wages)
What are the mistakes of reformists who think higher wages or wage equality will fix things?
Marx also notes that "in political economy, labor only exists as a wage-earning activity". It only recognizes labor that can be bought and sold. It ignores all the unpaid, creative, and self-directed labor that people do outside of the economic system.
Marx quotes a passage from Wilhelm Schulz's Movement of Production which states that,
if an extremely small subsection of workers experiences a wage increases, on average, worker wages have increased. This is a common way to mislead using statistics.
in addition, wage size is not enough to consider; one must also consider how permanent the value of that wage is, since capitalism in competition is such a volatile system, and the hours of work, which are by no means guaranteed to decrease with "the introduction of labor-saving machines".
Another passage from the same source again refutes the "rising tide lifts all boats" proverb in saying that
Even if the absolute amount of wealth per person increases, the relative gap between rich and poor can still get worse, and it's this latter measure that actually determines people's quality of life. Your income can grow while you're effectively falling behind even if you have more money than before.
Poor is a relative measure. The worker who makes the same wage after ten years isn't staying stable, they're losing ground. Lower buying power, opportunities, place in society. They become poorer relative to everyone else.
Abstract labor is a commodity, just like corn, steel, or oil. Its price (wages) is dictated by supply and demand, not by any recognition of human dignity or needs.
If wages are high, it means labor is scarce, so capitalists have to compete to buy it. If wages are low, it means there are too many desperate workers willing to sell themselves, so capitalists can pay them scraps.
Over time, wages must fall lower and lower because two forces are constantly driving them down:
If the capitalist can cut wages without causing a revolt, they will.
Since most people must work to survive, they'll underbid each other just to get any job, forcing wages even lower.
They'll also hire women and children because they're cheaper than men. Women, under the patriarchy, were expected to accept lower wages.
Eugène Buret, in his "De la misère..." stresses that the capitalist always has the power to walk away, while the worker must sell their labor or starve. If the worker doesn't sell their labor every single day, they lose everything. Labor is tied to human life.
If a factory owner can't sell steel today, they can store it and sell it later. A worker, on the other hand, if they don't work today, they don't eat today.
If labor is a commodity, then human life itself is a commodity. If your survival depends on being bought and sold, you're not "freely" selling labor, you're just a modernized version of a slave. The only difference is, instead of being owned outright, you beg to be rented by the hour.
Labor isn't really a commodity, though. A real commodity is something that's freely traded between equal parties. However, this relationship more amounts to extortion than a transaction. Ultimately, the system "perfects the worker" from the perspective of the capitalist and "degrades the man" behind the worker. Labor also cannot be accumulated or saved. "Labor is life, and if life is not each day exchanged for food, it suffers and soon perishes".
"if capital itself does not merely amount to theft or fraud, it requires still the co-operation of legislation to sanctify inheritance." (Jean-Baptiste Say)
The basis of capital, the foundation of private property in things produced by other people's labor, amounts to legalized theft.
Capital is something capitalists own but do not produce. It didn't start with hard work, it started with force, theft, and enclosure.
How does one become a proprietor of productive stock? How does one become owner of the products created by means of this stock? "By virtue of positive law." (Say)
You don't become a capitalist by working hard or creating value (the only way being the exertion of labor). You become one because the law says you are one.
What separates a capitalist from a worker is who owns the productive stock, and the way you get to own that is strictly a matter of legal recognition.
What does one acquire with capital, with the inheritance of a large fortune, for instance?
According to Adam Smith in The Wealth of Nations, you acquire not necessarily political power, but buying power. You get control over human labor and everything labor produces.
Marx states that capital is the governing power to dictate what gets produced, who works, and under what conditions. You command not just resources but the people who turn those resources into products of labor.
The capitalist only possesses the power of capital because he is the owner of capital, not because of his "personal or human qualities".
A worker, on the other hand, no matter how skilled, can only offer their labor. A capitalist, by virtue of wealth alone, can buy labor and dictate its terms.
Marx also notes that, while capital holds power over labor and the production that workers are employed to do, capital also holds power over capitalists themselves.
So what is capital?
Capital is stored-up labor.
Every machine, factory, or piece of equipment was built by workers. All capital was originally the result of labor. But instead of benefiting the creators of capital, it's hoarded and used to generate profits for those who own it.
Capital is stored-up labor, but what matters is who gets to control it. A pile of goods or resources isn't capital unless it's being used to extract even more wealth for its owner.
If you have stockpiles of food but eat it yourself, that's just stock. If you use it to force people to work for you in exchange for food, now it's capital.
It's stored-up labor that has been taken from workers, turned into an asset, and used to dominate future labor. It's wealth that doesn't work but forces others to work for it.
Lots of this section cites The Wealth of Nations.
Wages and profits are completely different. Wages are tied to actual labor performed. You work, you get paid. Profits are tied to the size of capital invested, not the work done.
You could have two capitalists doing the same amount of management work, but if one has ten times the capital, they get ten times the profit. Profit isn't based on effort. It's based on ownership.
In large operations, management gets handed off to a salaried clerk whose fixed pay has no relationship to the capital they're managing. The capitalist gets the profit just because they own the capital being invested.
Capitalists would have no interest in investing large sums of capital if the profit weren't to be proportionate to how much was invested in the first place.
The capitalist thus makes a profit, first, on the wages, and secondly on the raw materials advanced by him.
The capitalist extracts value twice from the production process.
First, they profit from wages. Workers create far more value than they're paid for. The difference between what they produce and what they earn is surplus value, which is extracted as profit.
Secondly, they profit from raw materials. They buy materials at one price and sells the final product at a much higher one. The one to do the work to transform those materials is the worker. The capitalist just owns the process.
What proportion, then, does profit bear to capital?
Wages are already tough to calculate precisely, but they have some basic consistency. Profit is much, much worse to calculate. The prices of goods change, competitors are introduced and eliminated, disasters, market shifts, etc.
At the time, Smith notes that in Great Britain, merchants expected their capital to bring in at least twice the going interest rate, just for existing. This was called a "common and usual profit".
Workers don't get this kind of "reasonable return" on labor. Fundamentally imbalanced.
What is the lowest rate of profit? And what the highest?
The lowest rate of profit must be greater than the costs of utilizing capital.
The highest rate of profit is a state in which workers' wages are driven to the lowest they can be while the worker stays alive and keeps working. Secondly, landowners will get cut out; their rent payments stop in order to minimize costs and maximize profit.
The capitalist has several ways of inflating market price:
Hiding market information. If a capitalist knows prices are rising in a distant market but keeps it secret, well, they address demand but anticompetitively. This isn't about efficiency or innovation at all, but withholding information.
Hiding manufacturing secrets. Self-explanatory. Hoard knowledge to extract profit. The innovation may be real, but is kept secret. Nobody can build off of it. Cost of doing business, right? /s
Natural scarcity. Products like rare wines are naturally limited. Capitalists never have to lower the price. Perfect inelasticity. Exploitation of scarcity.
Monopolies. You can charge the absolute maximum in a monopoly because nobody can compete.
Expansion. Profits shoot up when new territories or trade routes open up because capital is redirected, reducing competition in existing markets. Fewer goods = higher prices = more profit.
As Marx noted before, profit is also extracted from raw materials. For a raw material like cotton, a large chunk of its price might go toward rent/fixed costs, but as it's processed, like turned into clothing, the proportion going to rent/fixed costs shrinks, while the proportion going to wages and profit grows.
Evidently, every new stage of production requires bigger investment of capital. It's easier to produce just cotton than cotton + weaving it into clothing. These capitalists have the opportunity to layer more profits on top of previous profits.
Capitalists at the later stages of production accumulate more wealth, while raw material producers and low-skill workers make much less by comparison. Factory owners make more than farmers and brand-name corporations make more than their suppliers.
Division of labor increases profits due to heightened productivity.
Profits also go up when money circulation gets easier, like with paper money.
Capitalists only care about private profit. Whatever they invest in is based on what makes them the most money, and the most profitable industries aren't always the ones that benefit society.
Profit rates don't rise when society prospers. They're the highest when they're falling apart.
Rich, stable societies have low profit rates. Lots of capital, lots of competition, businesses require fairer play.
Poor, struggling societies have extremely high profit rates. Capital is scarce, wages are low, and desperate people will work for anything.
Countries on the verge of collapse are the jackpot. Workers have zero bargaining power and capitalists can buy up resources for extremely cheap.
Recessions, depressions, wars, and economic collapses are opportunities for capitalists.
The default capitalist strategy is to expand the market, increase demand, while reducing competition.
Adam Smith sums it up pretty well when he mentions that capitalists as a class "have generally an interest to deceive and oppress the public". They never have identical interests to society. In fact they're often in sharp opposition.
increasing capital -> more competition among capitalists -> cheaper products
Capitalists are interested in monopoly-price, i.e. highest possible price, which arises from a monopoly. Interests are in conflict with society.
"The sole defense against capitalists is competition", which political economy views as good due to raising wages and lowering prices.
However, competition is suicidal.
Note that competition is only possible from increasing and decentralized capital.
Competition is supposed to keep things fair, but capitalism always leads to monopoly. Capital only grows through accumulation, but, by the compound nature of capital, there's inevitably some capitals growing faster than others. The big fish eat the smaller fish, and competition dies out.
Competition creates accumulation, accumulation destroys competition.
As described above, the first to suffer as a result of increasing capital -> increased competition -> decreasing profit on capital is the small capitalist (more on this below).
Note, as before, increasing capital can only happen if the country's wealth grows as well.
Political economy points at the proportion between capital and revenue to predict the proportion between industry and idleness. The logic goes:
As capital grows, more money is available for lending and interest rates drop because
There is more capital, lenders have to compete to find borrowers.
With increasing capital, it becomes more and more difficult to find profitable investments just because there are so little opportunities.
Competition forces them to cut prices, take lower returns, and accept worse deals. The demand for labor increases, but labor isn't infinite, so capitalists have to start competing for labor. Higher wages and lower profits.
Therefore, Marx states, a small capitalist facing falling profits has two trash options:
Stop being a capitalist. They can consume their own capital to survive.
Try to compete by running their own business. But bigger capitalists already dominate the market, so the small capitalist has to undercut the big competitors, buy higher, and pay increased wages in order to survive.
However, this latter option is not going to work, since the big capitalist has every advantage, including being able to survive low profits longer, being able to undercut the small capitalist to drive them out of business, and paying less by buying in bulk.
This is how small capitalists disappear and markets consolidates. Capitalism trends toward monopoly.
In the event of a fall in interest rates, middle capitalists can no longer live off passive income (small-time investors on bonds, savings, dividends, not necessarily apartment leasers). They have to start businesses instead of just collecting interest.
As we've said before, profits fall with increasing capital. Middle capitalists are screwed and thrown back into the working class, reluctantly or not. Big capital continues to rise. The market is further consolidated in the case of increasing wealth and capital.
Circulating capital is money that's constantly moving, like raw materials, inventory, and wages. It doesn't make a profit while it's sitting still, only when it's used, sold, or transformed.
Fixed capital is long-term investments, like machines, land improvements, or factories. Not very frequent, but they can boost production or resilience.
Profits only come from keeping capital moving. A factory full of unsold products = no profit. Wages paid before production = temporarily lost money. Capitalists only profit when money is constantly cycling through different forms.
Every dollar saved on maintaining fixed capital is a dollar more for circulating capital. Reducing fixed costs = more room to increase labor costs without increasing costs in general.
Example being workers. Workers are fixed capital. Replacing workers with unpaid machines is often a win. More money for circulating capital.
“To hire out one’s labour is to begin one’s enslavement. To hire out the materials of labour is to establish one’s freedom.... Labour is man; but the materials of labour, on the other hand, contain nothing human.” (Pecqueur, Théorie sociale, etc., pp. 411-12.)
“Supposing that the daily labour of a worker brings him on the average four hundred francs a year and that this sum suffices for every adult to live some sort of crude life, then any proprietor receiving 2,000 francs in interest or rent, from a farm, a house, etc., compels indirectly five men to work for him; an income of 100,000 francs represents the labour of two hundred and fifty men, and that of 1,000,000 francs the labour of two thousand five hundred individuals (and 300 million [Louis Philippe] therefore the labour of 750,000 workers).” (Ibid., pp. 412-13.)
Competition is an expression of the rational freedom to exchange and freedom to produce.
each produces what he wishes, as he wishes, when he wishes, where he wishes, produces well or produces badly, produces too much or not enough, too soon or too late, at too high a price or too low a price
They really don't know anything:
none knows whether he will sell, how he will sell, when he will sell, where he will sell, to whom he will sell.
In the case of purchasing supplies to produce,
The producer is ignorant of needs and resources, of demand and supply. He sells when he wishes, when he can, where he wishes, to whom he wishes, at the price he wishes. And he buys in the same way.
In all this he is ever the plaything of chance, the slave of the law of the strongest, of the least harassed, of the richest.
One producer might make a lot of revenue, while the other has zero.
The supply does not know the demand, and the demand does not know the supply. You produce, trusting to a taste, a fashion, which prevails amongst the consuming public. But by the time you are ready to deliver the commodity, the whim has already passed and has settled on some other kind of product.
This seems like an extremely unstable and opaque system. And it surely is:
The inevitable consequences: bankruptcies occurring permanently and universally; miscalculations, sudden ruin and unexpected fortunes, commercial crises, unemployment, periodic gluts or shortages; instability and depreciation of wages and profits, the loss or enormous waste of wealth, time and effort in the arena of fierce competition. (Schulz, Bewegung der Produktion, 414-16)
A capitalist doesn't much care if they employ 100 or 1,000 people as long as the profit stays the same. Likewise, a nation doesn't care if it has 10 or 12 million people, as long as its net income stays the same. Sismondi takes Ricardo's logic and runs with it:
If human life is just a means to produce profit, then the ideal society is one where there are no humans at all. Just a kind turning a crank, operating machines that do all the work. No wages, no workers, no strikes, no human needs. Just pure, uninterrupted profit.
Capitalists must reinvest to stay competitive.
More capital -> more industry -> more goods (through DOL)
But demand doesn't grow at the same rate. Workers aren't paid enough. Overproduction. This is what creates boom and bust cycles.
When capitalists fully vertically integrate (they own every step of production, they don't have to buy inputs), they run out of ways to expand.
The solution is joint-stock companies so they can invest across multiple industries (agriculture, commerce, industry all at once).
As a result, there's no real competition left. The contradictions between farmers, merchants, and industrialists disappear because they're no longer separate. The ruling class is all of those at once.
The only contradiction left is propertied (capitalists) vs. non-propertied (workers).
A single ultra-capitalist could (and does) have a stake in everything from banks to leasing apartments to grocery stores. Workers no longer have independent employers to bargain with. Capitalists set wages, prices, and working conditions without resistance without a free market pressure.
When wages drop and poverty rises, workers have fewer housing options. But then again, housing is a necessity.
Enter jacking up rents and tenements and profiting off of them. The worse the economy, the better for landlords, since tenants are desperate.
Landlords are not the only ones though; there's also the vice industry.
When workers are ruined, they turn to alcohol, gambling, prostitution, and pawning off their belongings. All contributes to the flow of capital. Profits go to liquor sellers, casino owners, pimps, and pawnshops.
Slumlords profit off homelessness, vice industries profit off desperation, the system justifies all of it as normal economics.