The document summarizes Karl Marx's analysis of capitalism and class struggle. It discusses key Marxist concepts such as commodity fetishism, surplus value, appropriation of surplus value by capitalists, the deteriorating position of the working class or proletariat, and the reserve army of labor. It also outlines contradictions of capitalism that can lead to crises, such as a falling rate of profit, disproportionality between industries, and underconsumption from wage reductions.

1. Marxian Political Economy
Date of Presentation: 30 January, 2019
Course Name: Political Economy of Development
Course Code: DS 4201
Presented by: Group 3
Student ID: 152107, 152120, 152124, 152131,
152132, 152136, 152138, 152140

2. Contents
• Introduction
• Basic Analysis of Capitalism
• Capitalism and Commodity Production
• Commodity Fetishism
• Surplus Value
• Appropriation of surplus value
• Class Struggle & Proletariat’s Position
• Relative deterioration of the position of the working
class
• Reserve Army of Labour
• Crisis Contradictions of Capitalism Development

3. Introduction
• The political and economic philosophy of Karl Marx ;
in which the concept of class struggle plays a central role
in understanding society's allegedly inevitable
development from bourgeois oppression under
capitalism to a socialist and ultimately classless society.
• The analysis of class struggle involves the exploitation
of labour by capital within the capitalist mode of
production.

4. Basic Analysis of Capitalism
• Capitalism is an economic system where private
entities own the factors of production.
• The four factors are entrepreneurship, capital
goods, natural resources, and labor.

5. Basic Analysis of Capitalism (con’t)
• Capitalistic ownership means two things.
• First, the owners control the factors of production.
• Second, they derive their income from their
ownership.
• That gives them the ability to operate their companies
efficiently. It also provides them with the incentive
to maximize profit.

6. Basic Analysis of Capitalism (con’t)
• Capitalism requires a free market economy to
succeed. It distributes goods and services according
to the laws of supply and demand.
• The law of demand says that when demand
increases for a particular product, price rises.
• When competitors realize they can make a higher
profit, they increase production.
• The greater supply reduces prices to a level where
only the best competitors remain.

7. Capitalism
• Capitalism is an economic system and an ideology based
on private ownership of the means of production and their
operation for profit.
• Capitalism had the following characteristics:
 private property,
 capital accumulation,
 wage labor,
 voluntary exchange,
 a price system and
 Competitive markets.

8. Capitalism and Commodity Production
In Karl Marx's critique of political economy and subsequent
Marxian analyses,
‘the capitalist mode of production refers to the systems of
organizing production and distribution within capitalist
societies.”
The capitalist mode of production is characterized by
• private ownership of the means of production,
• extraction of surplus value by the owning class for the
purpose of capital accumulation,
• wage-based labour, and, at least as far as commodities are
concerned, being market-based.

9. Under the capitalist mode of production:
• Both the inputs and outputs of production are mainly
privately owned, priced goods and services purchased
in the market.
• Production is carried out for exchange and circulation
in the market, aiming to obtain a net profit income from
it.
• The owners of the means of production (capitalists) are
the dominant class (bourgeoisie) who derive their
income from the surplus product produced by the
workers and appropriated freely by the capitalists.

10.  The capitalist mode of production may exist within
societies with differing political systems such as:
 liberal democracy, Social democracy,
 fascism, Communist state.
 And alongside different social structures such as:
 tribalism, the caste system, an agrarian based peasant
 society, urban industrial society and post-industrialism.

11. Commodity Fetishism
Commodity fetishism is the perception of the social
relationships involved in production not as relationships
among people, but as economic relationships among the
money and commodities exchanged in market trade.
As such, commodity fetishism transforms the subjective,
abstract aspects of economic value into objective; real
things that people believe have intrinsic value.

12. Aspects of Marx’s notion of
commodity fetishism
Substance of value and commodity-fetishism
It is necessary to turn to Marx's own category about "what
kind of labor" does produce value, and the relation
between this and the form of appearance.
Substance of value and form of appearance
Expose the “contradictions" of the capitalist mode of
production.
"value," that is, "a definite social mode of existence of
human activity (labor)"

13. Criticism
The Marxist theory of commodity fetishism is criticized
from the perspectives of:
Capitalism as religion
• "Capitalism is a purely cultic religion, perhaps the
most extreme that ever existed“
• "The permanence of the cult"
• "Capitalism is probably the first instance of a cult that
creates guilt, not atonement"
• "God must be hidden from it, and may be addressed
only when guilt is at its zenith

14. Criticism
Market logic
Distinguish between commercial valuations
(commodities) and cultural valuations
Commodity iconoclasm
Human psychological beliefs about the value-
relationships inherent to commodity fetishism are not
religious beliefs, and do not possess the characteristics
of spiritual beliefs.

15. Surplus Value
• Surplus value explain the instability of the capitalist
system. Adhering to David Ricardo’s labour theory of
value, Karl Marx held that human labour was the
source of economic value.
• The precondition for the production of surplus value is
the transformation of labor power into a commodity.
• In the theory of surplus value the central problem is to
explain the mechanism of capitalist exploitation and
that prevail in bourgeois society.
• Surplus value is the essentially unequal exchange
between the worker and the capitalist, or between
wage labor and capital.

16. Surplus Value
• Marx begins his investigation of the process of the
production of surplus value by analyzing the universal
formula for capital:
M— C— Mʹ
in which,
M is money,
C is the commodity,
and Mʹ is greater than M (Mʹ = M + m).
• The formula shows the purchase of a commodity (M —
C) and its sale (C— Mʹ), which increases the amount of
capital. Marx used the term “surplus value” to designate
the increment of value (m) over and above the sum of
money (M) originally advanced and placed in
circulation.

17. Appropriation of surplus value
• In the purchase of use value of labour(service), the labour
would be paid for something equivalent to the exchange
value of labour time.
• when products created by the labour power command
more exchange value, this excess or extra is known as
surplus value.
• This surplus value is not created in the process of
exchange; it is indeed the worth of products produced
within the labour time by labour power.
• There is exploitation if part of the social product is
appropriated by a class of non – producers by custom or
law, or under the threat or use of force, or because refusal
to comply might disorganize the social reproduction.

18. Class Struggle & Proletariat’s
Position
A class is defined by the ownership of property. Such
ownership vests a person with the power to exclude
others from the property and to use it for personal
purposes.
Class struggle, or class warfare or class conflict, is
tension or antagonism in society. It is said to exist
because different groups of people have different
interests.
152124

19. Con’t
• According to Marxism,
there are two main classes
of people: The bouregoisie
controls the capital and
means of production, and
the proletariat provide the
labour. Karl Marx and
Friedrich Engels say that
for most of history, there
has been a struggle
between those two classes.
This struggle is known as
class struggle.

20. Forms of Class Struggle
• Class struggle appeared in some forms.
• First, there is an economic form. The proletariat
struggle with the bourgeoisie through their laborer's
organization in this form.
• Second, there is a political form. In this form, the
proletariat has their party and, through democracy,
they try to change the system.
• And the last, there is an ideological struggle. In this
form, the proletariat try to adapt the old governing
system to new social situations.

21. Con’t
• Finally, the division between classes will widen and
the condition of the exploited worker will deteriorate
so badly that social structure collapses: the class
struggle is transformed into a proletarian revolution.
• Marx's emphasis on class conflict as constituting the
dynamics of social change, his awareness that change
was not random but the outcome of a conflict of
interests.

22. Proletariat’s Position
• The proletariat is the class of wage-earners in an
economic society whose only possession of
significant material value is their labour-power (how
much work they can do)
• In Marxist theory, a dictatorship of the proletariat is
for the proletariat, of the proletariat, and by the
proletariat.
• On the Marxist view, this will endow the proletarian
with the power to abolish the conditions that make a
person a proletarian and, thus, build communism.

23. Con’t
• Marxism sees the proletariat and bourgeoisie (capitalist
class) as occupying conflicting positions, since workers
automatically wish their wages to be as high as
possible, while owners and their proxies wish for
wages (costs) to be as low as possible.
• According to Marxism, capitalism is a system based on
the exploitation of the proletariat by the bourgeoisie.

24. Relative deterioration of the position of the
working class
The main classes in capitalism are the bourgeoisie and the
proletariat.
a. Bourgeoisie:
 The bourgeoisie or capitalists are the owners of capital,
purchasing and exploiting labour power.
 Being wealthy is, in itself, not sufficient to make one a
capitalist
 What is necessary is the active role of using this wealth to
make it self- expansive through employment and
exploitation of labour.

25.  With the development of traders, merchants,
craftspersons, industrialists, manufacturers and others
whose economic survival and ability to increase wealth.
 In the struggle against the feudal authorities this class
formed and took on a progressive role.
 For a segment of this class, wealth came by employing
labour (industrial capital).
 It was the industrial capitalists who employed labour to
create capital that became the leading sector of the
bourgeoisie.
 In Britain, this class became dominant politically and
ideologically by the mid-nineteenth century.

26. b. Proletariat
 Since these workers have no property, in order to survive
and obtain an income for themselves and their families,
they must find employment work for an employer.
 This means working for a capitalist-employer in an
exploitative social relationship.
 If the capitalist-employer is to make profits and
accumulate capital, wages must be kept low.
 This means that the proletariat is exploited, with the
surplus time worked by the worker creating surplus
products.

27.  While the worker produces, the products created by this
labour are taken by the capitalist and sold – thus producing
surplus value or profit for the capitalist but poverty for
workers.
 Capitalists attempting to reduce wages and make workers
work more intensively
 People who had subsisted on the land were denied the
possibility of making a living on the land, and they become
propertyless.
 Together these changes created a large class of landless
and propertyless people who had no choice but to become
members of the proletariat

28.  While the relationship between workers and capitalists, or
between labour and capital may appear to be no more than
an economic relationship of equals meeting equals in the
labour market,
 Both capital and labor are required in production and an
exploitative relationship means an exploiter and someone
being exploited.
 The contradictory relationship has class conflict built into
it, and leads to periodic bursts of strikes, crises, political
struggles, and ultimately to the overthrow of bourgeois
rule by the proletariat.
 Class conflict of this sort results in historical change and
is the motive force in the history of capitalism.

29. Reserve Army of Labour
• Reserve army of labour is a concept in Karl Marx's
critique of political economy.
• Marx did not invent the term "reserve army of labour“
• It was already being used by Friedrich Engels in his
1845 book The Condition of the Working Class in
England.
• Although the idea of the industrial reserve army of
labour is closely associated with Marx.
• It refers to
the unemployed and underemployed in capitalist society.

30. • Structural unemployment on a mass scale rarely existed,
other than that caused by natural disasters and wars.
• Exploitation by capital requires workers to be free in
the double sense: free of possessions, but also politically
free.
• Marx differentiates the people with nothing to sell but
their labor power into six parts: lumpenproletariat, army
of labor, float, latent reserve, stagnant pool, and paupers.
• Big industry constantly requires a reserve army of
unemployed workers for times of overproduction.
• The main purpose of the bourgeois in relation to the
worker is, of course, to have the commodity labour as
cheaply as possible,
• Cheap labour is only possible when the supply of this
commodity is as large as possible.

31. • Capital only increases when it employs workers, the
increase of capital involves an increase of the proletariat
• Population grows faster than the means of subsistence, is
the more welcome to the bourgeois as it silences his
conscience.
• Masses of labourers, crowded into the factory, are
organised like soldiers.
• As privates of the industrial army they are placed under
the command of a perfect hierarchy of officers and
sergeants.
• The more openly this despotism proclaims gain to be its
end and aim, the more petty, the more hateful and the
more embittering it is.
• The mass of constant capital grows faster than the mass
of variable capital.

32. • The reserve army of labour will either expand or
contract, alternately being absorbed or expelled from the
employed workforce
• The availability of labour influences wage rates and the
larger the unemployed workforce grows.
• The more forces down wage rates; conversely, if there
are plenty jobs available and unemployment is low
• Tends to raise the average level of wages—in that case
workers are able to change jobs rapidly to get better pay.

33. Crisis Contradictions of
Capitalism Development
-By St. ID 152107
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34. Contradictions of Capitalist
Development
• Frist Contradiction : Labor Relation, Wage Labor.
(Demand for higher wages, pressure to keep wages
low).
• Second Contradiction: Tendency to undermine the
conditions of production. Tendency for capitalism to
eventually undermine the economic conditions for its
own perpetuation, through overproduction of
commodities, reduction of wages for would-be
consumers, and exploitation of workers, leading to
responses of workers to resist capitalism.
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35. • Flavors of Capitalist Crisis
Falling Rate of Profit – Profit
Squeeze
Disproportionality
Underconsumption
Heightened accumulation
> Increased supply + Diminished
demand
Crisis: Rush for liquidity >
Breakdown of Monetary Economy
Contradictions of Capitalist
Development
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36. Falling Rate of Profit
• Marx distinguished between a barter economy and a
capitalist economy.
• In a barter economy there is no excess production
thus no business cycles. Goods are produced only
when someone wants to consume them.
• But in a capitalist economy, production is separated
from demand. Overproduction can occur.
• When it does, prices and profits fall. Eventually, the
overproduction will cause wages to fall and profits to
rise
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37. Disproportionality Crisis
• Disequilibrium in one market may spread to others,
according to Marx
• Resource allocation from one market to another may
not be a smooth process - resources may not be
mobile
• This can exacerbate business cycles
37

38. Thank You