Welcome to Understanding Capital Vol. 1, where the goal is to analyze all angles of Capital, extract the important points, and summarize as much information as possible. The purpose here is less about inserting opinions on the work or what's said, and more about laying everything out to someone who has never read it, or someone who has a tough time reading it, yet can get a full understanding of the information.
Getting through the first three chapters, or Part 1, seems to be the toughest part of the entire Capital experience. While that focuses on the commodity, and its exchange with the role of money, the next three chapters, or Part 2, goes into a deeper discussion on the concept of capital itself, and how it relates to the concepts covered in part 1.
Chapter 4: General Formula For Capital
Money is the way that capital is realized, as it's a product of the circulation of commodities that can generate money into more money. Thus, it does not mean that all money is capital. If we look back to the C-M-C circuit shown in Part 1, the money only plays the role of purchasing another commodity; its sole power is to fulfill some sort of human need or desire, and is not capital. Capital, on the other hand, is when the start and end of the circuit are switched, which Marx notes as M-C-M, or Money-Commodity-Money. The end goal is to get more money from the money that you already started with, instead of using money to fulfill a need or want.
In other words, C-M-C cares about use-value, whereas M-C-M cares about exchange value. Let's supposed you have an old couch you're trying to get rid of, so you sell it (C) for money (M) to purchase some new clothes that you need (C). The goal here is to attain something useful, and the money in this equation is not capital. But let's look at an example where money is capital. Lets say you inherited $250,000 from a deceased relative (M). You use that money to purchase a property (C), and then re-sell that house for $300,000 (M). The money used to make more money is what's known as capital, and despite the $50,000 profit, no actual value was added to the commodity in question, assuming no work or additions were done to the house to increase its value. This leads us to a new feature of the circuit, M-prime. M-prime is M (the money that you got back that was initially used for purchase) +MΔ (the money made on top after re-selling for more than you paid), and the entire new circuit reads as M-C-M-prime.
Utilizing this circuit is the goal of the capitalist, and that difference between M and M-prime is known as surplus value. In other words, MΔ is the surplus value. Want another example that's a bit more realistic and small-scale? Suppose you have a friend that owns a machine shop. He makes a hammer, and sells it to you for $10. You then go and sell that hammer to someone else for $15. No value was added to that hammer by you buying it, but the price still went up for you to distribute it and turn a $5 profit. This is the crucial centerpiece for capitalism.
We can now understand that there are no limits to this equation, and that value continuously changes form between money, commodity, capital, and surplus value. The M-C-M-prime circuit is value in motion meant to expand, with continual growth by the person who gained the initial capital. The faster this repeats, the better the capitalist will do. The slower it repeats, the closer they will get to a crisis.
Chapter 5: Contradictions In The General Formula For Capital
Chapter five is very to-the-point, and further breaks down what was discussed in chapter four. Specifically, the contradiction focuses on the realization of no value being added just because someone buys and sells something. This is known as exchange of non-equivalents. Someone raises the price of something 10% above its value, and may now purchase something from somebody who sells their product 10% above its value. It's another way of seeing that there is no value being added. Let's look at the hammer example again. If you sell that $10 hammer for $15, but then someone else sells you a sickle they bought for $10 at $15, you both end up exactly where you were at the beginning. No value or labor is added to either product, yet both went up $5 simply for being purchased and re-distributed. How could a capitalist sell something at its purchased value and come back with more money than they threw in? This is the general contradiction of the entire equation for capital.
Chapter 6: The Buying And Selling Of Labor Power
By now we know that labor power is what gives a commodity value in the first place, outside of its use value. We can thus conclude that the expansion of value must take place in the "C" phase of M-C-M. Whoever starts with the money must find labor power, which is a special commodity. For labor power to be bought, a laborer (or worker) must have their labor for sale. They also must only have this to sell, because if the laborer had capital, or commodities to sell, they wouldn't have any need to sell their labor power and be a worker for someone else.
Look at small businesses, for example. If you own a successful restaurant, you have no reason to go work for someone else. But lets say that you hit a crisis, and go out of business. Now you must sell your labor power to another capitalist, or a larger company will buy your company. You're either now selling your labor to that larger company, or you go work elsewhere.
Going back to the first chapter, on how labor power can be represented in commodities, this shows that a bundle of commodities produced by a worker over a certain period of time can be reflective of labor power in the larger picture. In order to stay consistent, labor power value should move to meet the social needs of a worker. If rent or food prices go up, so should wages. When that doesn't happen, poverty occurs, and prevents reproduction of labor power. In a way, this is a spot where capitalists dig their own graves.
Conclusion:
Labor power is unique in that it's a part of someone, whether it's brain power, manual labor, physical time or attention, etc. Regardless of how much value you produce, when you sell your labor to someone else, you're always taking home the same amount, and it's fronted a week (or more) without collecting interest. If you work at a store, and in one week's time you have 500 customers in your line, and another week 1,000, you're paid the same amount regardless. You won't see a paycheck until long after your work is done, and all the excess value produced by your labor is extracted by the owner.
"Freedom" under capitalism is the freedom to be forced to sell labor power in order to survive, and the freedom to attain the micro-sized chance of becoming a ruling capitalist. No natural social basis exists to put workers and owners on opposite sides, it's just what happens when ownership of means are privatized by few. The more division of labor, the more commodities will be sold by a price rather than their actual value due to constant distribution and private ownership. Multiple modes of production can exist in one nation, since there wasn't one single point in any country's history where the capitalist class came to be.
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