CAPITAL Karl Marx 1867 Athens, February 12,

Capitalism is a system of commodity production In a capitalist system, producers do not simply produce for their own needs (subsistence), or only for the needs of individuals with whom they are in personal contact -- capitalism involves the production of commodities for exchange in a nation-wide, or international market 2

Commodities “A commodity is, in the first place, an object outside us, a thing by its properties satisfies human wants of some sort or another” (69) Commodities are products of labor, bought and sold on the market All commodities have a two-fold character: a use value and an exchange value 3

Use value and exchange value The utility of a thing is its use-value an object can have use value whether or not it is a commodity, but to be a commodity it must also have exchange value Use value is realized only in process of consumption Use values, which occur in all societies, are determined by their physical properties in relation to human needs – clothing keeps one warm, bricks provide shelter Exchange value refers to the value a product has when offered in exchange for other products in market transactions exchange value presupposes "a definite economic relation," and only has meaning in reference to commodities, or the equivalent in money 4

Labor theory of value Labor theory of value: the value of an object is determined ultimately by the amount of labor time that it took to produce it Human labor is the one commodity that is exchanged for its value while being capable of producing more than its value Surplus value: the difference between what workers earn for their labor and the price or value of the goods that they produce 5

Labor exploitation Surplus value is the source of the capitalist’s profit: the capitalist pays the worker less than the value of what she actually produces it is also the source of the capitalist’s exploitation of the worker because the worker gives more than is given in return without having any voice in this relationship of exchange 6

Capitalism & the Fetishism of Commodities A fetish (from the Latin facticius, "artificial" and facere, "to make") is an object believed to have supernatural powers, or in particular, a man-made object that has power over others Fetishism is the belief that natural objects have supernatural powers, or that something created by people has power over people As labor increasingly becomes an abstraction in the capitalist system of production, we come to forget the human social relations behind the products of labor, even though the products were created by people 7

Commodity fetishism To producers, “the relations connecting the labor of one individual with that of the rest appear, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things” Commodity fetishism refers to the distorted relationship existing between individuals and the production and consumption of goods We treat the goods we buy as if they have “magical powers,” losing sight of the fact that we create commodities 8

US Capitalism: 1940s – early 1970s Postwar boom (1945 – late 1960s): a long period of growth in GDP and real median income aka the “Golden Age” of US capitalism 1940s – 1970s marked heyday of the “welfare state” Critics call it “Big Government” Postwar advanced industrialized economies featured government intervention, subsidies to select industries, protection of labor rights, expansion of public spending (in education, infrastructure, etc.) trade protectionism (e.g., import tariffs) 9

US Capitalism: late 1970s – present Deregulation Shift from manufacturing to service economy  esp. FIRE (Finance, Insurance, Real Estate) De-unionization weakening of workers’ “collective bargaining” rights Globalization, offshoring Income stagnation for majority of workers, which led to: Increases in hours worked per household, rise of 2-income households Growing household debt, as credit is used to make up for income loss Financialization 10

Financialization Financialization: economic process that attempts to reduce all value that’s exchanged (tangible, intangible, future or present promises, etc.) either into a financial instrument or a derivative of a financial instrument Original intent was to be able to reduce any work-product or service to an exchangeable financial instrument, like currency, making them easier to trade  financial leverage tends to override capital (equity) and financial markets tend to dominate over the traditional industrial economy 11

Financialization: benefits & costs Workers, through a financial instrument such as a mortgage, could trade their promise of future work/wages for a home Students, through student loans, could trade the promise of future work/wages for a college degree Financialization of risk sharing makes insurance possible, financialization of US gov’t promises (bonds) makes deficit spending possible Financialization also makes economic rents possible economic rents are "excess returns" above "normal levels" that take place in competitive markets 12

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US wealth distribution today? Psychologists Dan Ariely and Michael I. Norton asked people to identify wealth distribution in the US, by quintiles, or fifths “ Home of the Free, Land of the Poor,” Making Sen$e, PBS Newshour, 8/16/

2/Freedonia, Sweden, US Which countries do pie charts A, B and C represent? 1/US, Spain, Egypt 2/Freedonia, Sweden, US 3/Luxembourg, US, Somalia Country A Country B Country C 15

Economic Policy Institute delivers annual analysis of the “State of Working America” Despite an increase in productivity of more than 22% by 2010, typical wage earners made roughly the same amount per hour as in 2000 Median family income was 6% lower in 2010 than in 2000 This lost decade of no wage and income growth began well before the Great Recession—which started in Dec. 2007—battered wages and incomes In the weak economic expansion following the 2001 recession, hourly wages & compensation failed to grow for either high school– or college-educated workers Consensus forecasts predict that unemployment will remain high for many more years, suggesting that typical Americans are in for another lost decade of living standards growth E.g., as a result of persistent high unemployment, the incomes of families in the middle fifth of the income distribution in 2018 will likely still be below 2000 levels 16

State of Working America’s mobility Less than 1% of those making under $28,000 a year would rise above $117,000 ten years later 73% of those in the top 1% stayed within the top 5% within that ten-year period The top stay at the top, and the bottom stay at the bottom And education DOES NOT solve this: EPI finds that “high-scoring students of low socio-economic status are no more likely to complete college than low-scoring students of high socio-economic status”

Share of people in the bottom and top family income fifths moving along the income scale, 1970–1980 to 1995–2005 Note: Moving far means moving at least two income fifths (e.g., from the bottom to the middle fifth, or from the top to the middle fifth). Data are missing for 1986–1996, 1988–1998, 1990–2000, 1992–2002, and 1994–2004.

Characteristics associated with leaving the bottom income fifth Note: Bars show how much the chance of leaving the bottom income fifth changes if the head of household has the identified characteristic relative to not having it (e.g., being white relative to being nonwhite or having a high school education relative to not having it.

Wealth gap greater than income gap 20

Wages and compensation stagnating Hourly wage and compensation growth for production/non- supervisory workers,

Median income growth slows substantially since early 1970s Real median family income,

Low-, middle-, and high-income growth, Real income growth for different income percentiles diverged in 1970s, with real incomes flattening in 20th percentile and median, and increasing in 95th percentile 23

Poverty no longer falls as economy grows Actual and simulated poverty,

Top 1% hasn't controlled such a large share of the economy since eve of the Great Depression 25

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US Income Distribution,

End of the Golden Age of US capitalism? (“30 More Years of Hell?” C. Kilpatrick, Jacobin) “Boomers grew up under a capitalism that had to be hammered and shaped into respectability over a 30-yr period. But for us, we’re left staring at the monstrosity in its natural state. With a quarter-century’s worth of quasi social-democratic reforms either neutralized or withered away, and with no more credit to hose us down, we’re able to see the beast for what it truly is.” “While a liberal looks upon the New Deal and Great Society generation as a pantheon of benevolent patriarchs, I see a bunch of technocrats who slapped together a crude simulacrum of social democracy and called it ‘free-enterprise.’ Just as in the submerged state of 2012, they did their best to make the government’s hand all but invisible, all the while using the machinery of the Cold War to purge labor radicals– McCarthyism’s real target–leaving us helpless after the onslaught began. They then told their children–the Boomers–to scorn these dirty reds, and to thank good ol’ American capitalism for the chicken in every pot.” 29

Thirty More Years of Hell? C. Kilpatrick, Jacobin Kilpatrick presents a radical left critique of the myth & reality of US capitalism from a Millennial perspective New Deal & Great Society reforms are misrepresented by Baby Boomers The welfare state was never as strong in the US as in west European social democracies The “ruling class” benefited more from reforms than the workers and the poor that struggled for them Much of the benefits they’ve gotten from the government are “hidden” in the “submerged state,” making it easier for them to preach the gospel of “free enterprise” and rail against Millennials’ “sense of entitlement” 30

Comparing the cost of college Average state tuition in early 1980s was around $8k (in 2008 dollars) for four years Most Millennials are forced into the mid-five-figures range for a second rate public university education Pell Grants–when the Boomers were attending college– covered 77% of the cost for a four-year public university For Millennials, the figure is 35% Student loans: “a servitude from which we can never escape. Forget bankruptcy. Default on a student loan and the government will garnish your wages until they get it all back, plus interest. They can even go after your social security money, off limits for all other debts.” The actual cost of universal free higher education is negligible–estimated somewhere between $15 and $30 billion. [“30 More Years of Hell?” C. Kilpatrick, Jacobin] 31

Metatheoretical Map Nonrational Rational Individual Collective A C T I O N ORDER surplus value class conflict class interests labor exploitation forces & relations of production commodity festishism alienation/estrangement 32

Metatheoretical Map Nonrational Rational Individual Collective A C T I O N MARX DURKHEIM 33 ORDER