which we might call “free-trade imperialism.” Smith himself took his logic to suggest that colonial power was not always what it was cracked up to be, and he supported the American desire for independence, suggesting the North American colonies be given representation in British Parliament, join a “federal union” with Britain, or better, be entirely emancipated from colonial rule.
Karl Marx
Smith and his followers are why we use the term “neoclassical” to describe modern economists who argue that the market is the most efficient and fair way to distribute.9 They are, or at least see themselves as, the “new” Smithians (but with a couple of important twists, as we will see). But not all Smith’s admirers have been market fundamentalists. Marx, for instance, is sometimes thought of as the anti-Smith, but if we look at their ideas, they are not so radically opposed. The most important difference between them lies not in their explanation of what drives capitalist production, but in the fact that Smith saw increasing harmony and mutual interdependence where Marx saw conflict, exploitation, and inequality. In his analysis of capitalism—and remember, unlike Smith, he wrote after the rise of the terrible factory system—Marx emphasized the tensions and conflicts endemic to capitalism, both in the relations between capitalists, and between capitalists and workers.
Marx called these processes “contradictions”: opposing or conflicting forces, whose interplay would eventually produce new forms, which would themselves contain their own contradictions. He argued that it was the force of these contradictions, the inability of any system to stay put in some steady state, that drove historical change in and through different modes of production. For example, as the technical and organizational forces of production change over time, they become less and less compatible with social relations that developed on the basis of earlier ways of doing things. The contradictions that emerged mean that eventually the relations must be reconfigured, sometimes radically.
Marx explained basic capitalist dynamics in the following manner. First, he adopted from Smith a distinction between use value and exchange value. Things that humans use labour to produce virtually all have a value “in use,” something you might do with it, like a hat you wear or a loaf of bread you eat. In any exchange system, things produced by labour also usually have a value “in exchange”: you can get something from someone else by trading them. In a monetary system, capitalist or not, producers sell things with use value on the market (if they didn’t have use value, no one would buy them) and receive money in return.
The two values do not have to be equal; indeed, they never are, since they represent two completely different phenomena. Use value is qualitative and non-generalizable; how do you measure the “usefulness” of a hat on your head, and if you did, would it be the same measure for everyone? Exchange value is clearly quantitative. In fact, that is basically all it is, a quantitative indication of an object’s value in exchange. What you can get for it can be very diverse, like in barter. Or it can be socially standardized, as in, say, 1 hat = 10 buttons. In either case, only exchange value is quantifiable, and, according to Marx, money emerges in a society when one commodity becomes the standard quantitative measure of exchange value. He calls that special commodity the “general equivalent,” because it is seen as quantitatively equivalent to any other commodity. It is the commodity that everyone understands as the one thing that can be accumulated, or piled up, in amounts that, in value terms, are socially accepted as equivalent to anything tradable. There is no reason money has to take any particular form; we could use buttons for money if everyone accepted them as money.10 Of course, how we come to accept money as money—do we “decide” democratically, or are we “told” authoritatively?—is an important question, to which will we turn in Chapter 3.
Marx considered the distinction between use value and exchange value essential, because in capitalism, in contrast to many other modes of production, wealth is accumulated in the form of exchange value: i.e., money. In other times and places—for example, among pre-conquest First Nations of the North American Pacific Northwest, where I live—wealth was accumulated in the form of use-values. To be wealthy meant possessing assets considered valuable, like food and clothing and slaves. (In some of these First Nations, the powerful demonstrated that wealth by giving it away “for free” in a ceremony called “potlatch.”) By Marx’s time, only money or assets readily convertible into money counted as wealth in Europe and North America.
One defining feature Marx noted about the world in which he lived was the glaring difference between people’s opportunities to accumulate wealth, and hence to enjoy security and a full and happy life. These differences depended on what people had to do to put food on the table. While virtually everyone has some capacity to contribute labour to producing things with use and exchange values, few both have the capacity to labour and own the stuff labour needs use to produce things—land, natural resources, tools, factories, etc. I might have all the skill and energy in the world, but without lumber, a hammer, nails and some wire, I cannot build a fence. You might be the most talented chef in the land, but without stoves, ovens, pots, utensils, and food, your hands are idle. These things that help us produce other things (and the money to purchase such “means of production”) have a special status. They are the magic things that, mixed with labour, turn raw materials into other materials for use and exchange. This special relation is what makes them capital, and makes the smaller group of people who own and control them capitalists.
What needed explaining, according to Marx, was why there were capitalists at all. Why didn’t everyone have, or at least have access to, those things that enabled you to produce things for use or exchange? How did the capitalists get to be the ones with the tools and resources? In search of an answer, he looked at European and especially English history. In light of those histories, he argued that capitalists and capitalism arose through a series of processes he called “original accumulation” (a phrase often translated less helpfully as “primitive accumulation”). By forcefully asserting a property right over what had been collective resources—enclosing common land, appropriating raw materials from colonized peoples, etc.—the means of production became concentrated in the hands of a few. This left the expropriated many with no means of getting by on their own. To survive, they had no choice but to find a way to get access to the means of production, which are also the means of putting food on the table.
One the most important conclusions Marx drew from this historical analysis is that capital can only exist in relation to its opposite, labour. Original appropriation by the few from the rest not only meant the emergence of capital, but also of wage labour. Once dispossessed, the many can get access to the means of production only by offering their capacity to work to the capitalists, in return for payment in some form. Selling one’s energy and skills for wages on the “labour market” is the source of one of the most important features of capitalism according to Marx: the distinction between labour and labour-power. Labour is the specific or “real” act of working. Labour-power is the abstract “capacity to work”: skills, knowledge, energy, etc. specific to each of those without access to means of production except through capitalists. Wage workers do not sell “living labour,” they sell the commodity labour-power on the labour market. The capitalist, who thus comes to control one more thing necessary for production (and the most important one at that—human energy and ingenuity) puts that labour-power to work as he or she sees fit, and pays the workers a wage for each unit of time they give up the control of their human energies.
Capitalists use labour-power, in combination with the means of production, to produce commodities for market exchange. (Commodities are, by definition, things produced for sale on the market—if you grow carrots to put in your salad, they are not commodities.) By selling commodities for more than it costs to produce them, capitalist profit is made possible. This is why Marx emphasizes capitalism’s social relations, and not merely its technical features, like, say, “advanced industrial machinery.” It is not technology or the form of firms’ “capitalist” organization, but property and other relations that define capitalism as capitalism. Capital is a social
