Upstream - Marx's Capital Vol. 1 w/ David Smith

Episode Date: March 25, 2025

Capitalism is a social phenomenon—yes, it is deeply grounded in concrete, material reality—but it’s a reality that ultimately relies on a series of tricks and spells, awash in deceit and veiled in subterfuge.  What is capitalism, exactly? How does it function? Why are we seemingly trapped inside of it? And, perhaps most importantly, how can we break free? Well, in this episode we’re taking a very deep dive into the crowning achievement of a man who spent his entire adult life seeking answers to these questions. Karl Marx wrote Capital Vol. 1 over ten years, spending countless hours researching and redrafting this crucial text until it was finally published in 1867. It incorporates vast amounts of historical data, concrete examples, and brilliant theorizing and is ultimately one of the most important books to ever be written. In it, Marx explains how capitalism functions. And in this episode, we’ve brought on a scholar and expert on Marx to walk us through it.  David Smith is Professor of Sociology at the University of Kansas and author of the book Marx’s Capital Illustrated. In this conversation, we explore Capital Vol. 1 through the lens of David’s accessible guide, illustrated by Phil Evans. We explore and unpack concepts like the commodity, use and exchange value, and abstract and concrete labor. We talk about what money is, what capital is, and unpack the famous concept of commodity fetishism and the role it plays as the guiding spirit of capital accumulation. We talk about how capital accumulates while taking a journey into the history of expropriation and the creation of the propertyless proletariat during the enclosures in Britain and in other parts of the world. We talk about how profit is generated by capitalists through our surplus labor, what the rate of profit is and why it has a tendency to fall, and finally, why Capital Vol. 1 remains an essential text for understanding the world around us.  Further Resources Marx's Capital Illustrated, by David Smith (Illustrated by Phil Evans) Capital: A Critique of Political Economy Vol. 1, Karl Marx Why Socialism? by Albert Einstein How Europe Underdeveloped Africa, Walter Rodney Planet of Slums, Mike Davis Roots of the Current Economic Crisis: The Falling-Rate-of-Profit Tendency, Insufficient Destruction of Capital, and Bubbles, Andrew Kliman Related Episodes: Historical Materialism w/ Torkil Lauesen Dialectical Materialism w/ Josh Sykes Marxism for the Masses w/ Savannah from All Power Books The Myth of Freedom Under Capitalism (Documentary) Walter Rodney, Marxism, and Underdevelopment with D. Musa Springer & Charisse Burden-Stelly Intermission music: "November Rain" by Mount Eerie Upstream is a labor of love—we couldn't keep this project going without the generosity of our listeners and fans. Subscribe to our Patreon at patreon.com/upstreampodcast or please consider chipping in a one-time or recurring donation at www.upstreampodcast.org/support If your organization wants to sponsor one of our upcoming documentaries, we have a number of sponsorship packages available. Find out more at  upstreampodcast.org/sponsorship For more from Upstream, visit www.upstreampodcast.org and follow us on Twitter, Instagram, Facebook, and Bluesky. You can also subscribe to us on Apple Podcasts, Spotify, or wherever you listen to your favorite podcasts.

Ah Ah What he calls fetishism is the belief that what is inherently social, the belief is that it's actually natural. So for example, if it is naturally true, if it's simply a fact of nature that products must sell before they can be used, if it's natural for products to take the form of the commodity, then hope for transcending that reality is basically out of the picture.

Marx's argument is that the obstacles we face are socially constructed. It's the decision that society tacitly makes every single day to prevent sharing, to require selling. If there was a sudden global amnesia that affected all 8 billion people on the planet, we could wake up the next day and forget what the price was, forget what a QR code is, and simply see the world around us and resolve to make and share what we need. You are listening to Upstream. Upstream. Upstream. Upstream.

A show about political economy and society that invites you to unlearn everything you thought you knew about the world around you. I'm Della Duncan. And I'm Robert Raymond. Capitalism is a social phenomenon. Yes, it is deeply grounded in concrete material reality, but it's a reality that ultimately relies on a series of tricks and spells, awash in deceit and veiled in subterfuge. What is capitalism exactly?

How does it function? Why are we seemingly trapped inside of it? And perhaps most importantly, how can we break free? In this episode, we're taking a deep dive into the crowning achievement of a man who spent his entire adult life seeking answers to these questions. Karl Marx wrote Capital Volume 1 over 10 years, spending countless hours researching and redrafting this crucial text until it was finally published in 1867. The text incorporates vast amounts of historical data, concrete examples, and brilliant theorizing,

and is ultimately one of the most important books to ever be written. In it, Marx explains how capitalism functions, and in this episode, we've brought on a scholar and expert on Marx to walk us through it. David Smith is professor of sociology at the University of Kansas and the author of the book Marx's Capital Illustrated. In this conversation we explore Capital Volume 1 through the lens of David's accessible guide illustrated by Phil Evans. We explore and unpack concepts like the commodity, use and exchange value, and

abstract and concrete labor. We talk about what money is, what capital is, and unpack the famous concept of commodity fetishism and the role it plays as the guiding spirit of capital accumulation. We also talk about how capital accumulates while taking a journey into the history of expropriation and the creation of the propertyless proletariat during the enclosures in Britain and in other parts of the world. We talk about how profit is generated by capitalists through our surplus labor, what the rate of profit is and why it has a tendency to fall, and finally, why Capital Volume 1 remains an essential text for understanding the world around us. And before we get started, Upstream is almost entirely listener-funded.

We couldn't keep this project going without your support. There are a number of ways that you can support us financially. You can sign up to be a Patreon subscriber, which will give you access to bi-weekly episodes ranging from conversations to readings and more. Signing up for Patreon is a great way to make Upstream a weekly show, and it will also give you access to our entire back catalogue of Patreon episodes, along with stickers and bumper stickers at certain subscription tiers. Sign up and find out more at patreon.com forward slash Upstream podcast.

And if Patreon's not really your thing, you can also make a tax-deductible, recurring, or one-time donation on our website upstreampodcast.org forward slash support. Through this support, you'll be helping us keep upstream sustainable and helping to keep this whole project going. Post-capitalist political education podcasts are not easy to fund, so thank you in advance for the crucial support. And now, here's Robert in conversation with David Smith. David, it's a pleasure to have you on the show. It is an absolute pleasure to be here, Robbie.

Thank you. So I would love it if you could just briefly introduce yourself for our listeners, give them a sense of who you are, maybe a few words about how you came to do the work that you're doing. Yeah, not everybody feels the need to read capital intensively, so something about my background would be helpful. Like many people of my generation, I was swept up in the big social justice movements of the late 60s and 1970s, and the challenge of those movements, the really heartening promise of those movements, led me to really a deep concern with the challenge of those movements, the really heartening promise of those movements,

led me to really a deep concern with the nature of our society, trying to better understand the framework, the motor that makes our society move. And I was initially skeptical that reading Capital, per se, would be directly relevant. It seemed like an old musty book from the 19th century. But I had the instinct to try to see what I could learn from Marx's Capital. And so that led me to a process where I actually at one point when I was in graduate school, I read Capital every single day for hours every day taking notes and going at a snail's pace, paying attention to every word, every sentence. And I had been led to believe by some of

my teaching assistants that capital was really a problematic text, that it had a lot of sensible things to say about the world, but that Marx's theory of value in particular was too philosophical on the border of being metaphysical and that it would be better just to skip over that. So when I began to read capital, that was my presumption, but I simply could not find the fatal flaw. And what others were interpreting as metaphysics struck me as being very, very sensible thinking about what it means to live and feel and think in capitalist society. So at a certain point, after I had been working on this topic for quite some time, and I had written a dissertation with some hundreds of pages on the subject, I was talking to a friend

of mine who was a film specialist, and we had the idea of making an actual animated film about the basics of capital. That didn't happen, but I then did end up with a contract to write this illustrated book called Marx's Capital Illustrated. And it's a small paradox that you and I are recording an audio account of an illustrated book. So I regard it as my responsibility here to be fairly animated, even if I can't make the text come to life visually for listeners. But I will say that since I have written many things, most of which are not illustrated, the interest and the challenge

of writing this particular book was really eye-opening. Many people would think that writing something that was called a documentary comic book might be a kind of light exercise, and it was a light-hearted exercise. I felt perfectly free to tell bad puns, engage in all kinds of irreverent wordplay, and just have fun. But it was a really interesting writing challenge, because I wanted to be as clear as possible. My goal was to be intelligible to people

who were just beginning to have some curiosity about the subject. So I wanted to be as clear as possible. But I also wanted to convey the sense that this is a book that really speaks to us in every kind of way. So it's a very, very serious account. It has many tragic stories to tell along the way,

but it's written with a kind of energy and verve and a feeling of contemporary significance that I wanted readers to perceive. So I worked as hard as I could. I had a really excellent relationship with the cartoonist, Phil Evans, who did the illustrations. And in the relatively recent past, in the aftermath of the Great Recession of 2008,

I actually returned to the book, as you know, and wrote an after afterward about its contemporary relevance. So the afterward is called the crash and after, and we are still living in the echoing aftermath of that crash. Absolutely. And so cool to apply the theories that were developed through Capital to current events. And that was a really cool epilogue.

And despite the fact that 2008 was almost 20 years ago, it's more relevant, I think, than ever. And just a quick note, you mentioned your college experience where some of your professors were a little bit hesitant about Capital Volume 1, at least certain parts of it, the labor theory of value, stuff like that, which we'll get into a little bit. But I had a similar experience. In fact, I studied anthropology and philosophy double major and I had so little marks, remarkably, in my education in my higher education as an undergrad, that it's like baffling for me to look back on it. I remember one of the only times one of my philosophy professors brought up Marx was to sort of poo poo him

and say that like sort of disparagingly that Marx actually believed that history had to go through certain phases and that he believed in a sort of determinism that was just absurd and crazy and that kind of thing. So it's just really interesting to hear other people's accounts of like how they were introduced to Marx in higher education. So I just wanted to share that about my personal experience. And then also just to really underscore, like you mentioned, we're doing an audio version of an illustrated guide, right? So there's so much that is, you know, we're limited by that, but we're

also opened up to new possibilities in doing that. But just to reiterate, buy the book. It's really, really good. Trust me, you want this book, whether or not you've read the entirety of Capital Volume One, or you haven't even opened the first page, this book is going to be helpful in some way for you and the illustrations by, like you mentioned, your collaborator Phil Evans really do help make it accessible and fun and engaging. And one place that you can get the book is through All Power Books, which you may recall from our last episode, we did a talk with Savannah from All Power Books on bringing Marxism to the masses

and teaching Marx at an eighth grade level and they carry the book there as well. Okay, let's get into the book. We've been talking about it, sort of leading up to it, let's get into it. So I think the first thing that I want to start with, it's where Marx starts and it's where you start in Marx's capital and it's sort of the starting point for all of this is in chapter one, the commodity. So can you just tell us what commodities are, this idea of how they lead a double life and why this is important as a starting point for understanding capitalism.

Yeah, absolutely. So Marx begins with the commodity, that's the title of chapter one of capital. And his definition of the commodity is not what economists currently use the word to mean so people should be aware of that. Marx means something very simple. It's anything that's produced to be sold. So in the simplest possible terms, the commodity has two dimensions. It's a product that can be used directly or it can be sold and only used after it's sold. So when you talk about commodities, it might sound at first glance as if we're talking

about something academic or remote, a technical distinction, but something I like to say in conversation about Marx's theory of the commodity, which is also very much a theory of money and capital. The commodity is not just a word, it's our everyday reality on pretty much every level. If you, Robbie, look around your room right now, or if I look around my room, it's a challenge to see anything, literally anything in our environment that was not produced for exchange. The production occurred so that a sale would follow and that the manufacturer would make a profit. So commodities are everywhere.

They permeate our existence from top to bottom. And when you say commodity, you're also basically and inherently saying money. It's clearly the case that in the relatively remote past, people had direct barter. So there were situations you know, situations where people exchanged one commodity for another. But that is, for the most part, so far in the past that it's not even really directly relevant. Marx wanted to understand capitalist society. So when you say that something has been produced for exchange, you're really saying it's being produced to be purchased with money. So money, like commodities, is absolutely everywhere.

I sometimes think that money is like the oxygen of our society. We basically can't even breathe without money. Without money, we can't find lodgings. Without money, we can't eat. Money is the master key that opens every lock and if you don't have money you are debarred from pretty much anything and everything. So a world where production is for exchange is a world where people are prevented from using the products, prevented from having access to the food, the lodging, everything else they need, if they lack money. And even though capitalism has many people who champion it, who say that society has advanced incomparably far beyond what we were experiencing globally a century or two ago,

nonetheless, if you cast your eyes around the globe right now, you find not just hundreds of millions, but billions of people who suffer every day from a lack of money. And even those of us who are lucky enough to have jobs with reasonably reliable wages are always vulnerable to the next downturn. So even people who feel secure in their wage earning status are just a decision or two, a recession away from being out on the street. So this is not an academic topic, even though it is something that requires

academic and scholarly thought. This is our daily reality on almost every level. Absolutely. You are closer to being homeless than you are to being a millionaire. And that's just the reality of the situation for many, if not most of us under capitalism. Okay, so thank you for introducing us to the commodity, which as you write in the book is anything produced for exchange. And so now let's get into it a little bit more because there's a lot more to the commodity that we need to understand in order to really grasp how capitalism works. Marx says that there is a contradiction between two dimensions of the commodity, use value

and exchange value. And I remember when I first came across this distinction, it felt huge to me, like a profound insight that was just sort of lurking beneath the surface of my reality. And it made a lot click in how I looked at things and how I valued things. And so, yeah, I would love it if you could just talk about this and walk us through the two contradictions of the commodity in its so called double life. Let's just say that the commodity is actually just to refer back to the illustrated book. Here's an example of one

of the bad puns or plays on words that I use. I actually opened a section on the commodity defining it as a common oddity, which is a silly phrase on one level, but it's also quite seriously intended. I was saying a few moments ago how absolutely common the commodity status of the product is, but what you're alluding to is the degree to which the commodity is in a certain sense strange and is in a certain sense an oddity. So if you look at a product and let's focus on things that people make, if you look at a product that in the first instance it is something simply material, it is simply a thing, an object that can be used and Marx at one point says it's as clear as noonday, what the product is as a use value.

And the word use value, I should point out, is a term that Marx inherited from previous economists. He did not mean to imply that the use of the product is a function of its value in technical terms. We'll talk in a few minutes about what Marx means by the word value. But what we're really talking about here is simply a useful object, something that has usefulness given its material properties. There's nothing mysterious about that. What makes the commodity

an oddity is the fact that it has this complicated social identity. So it is simultaneously something material and something social. Now, what do I mean by something social? Well, you can easily visualize that when you visualize a product that has a barcode or a QR code or a price tag. A commodity is a physical thing that has the social status of being for sale. So it has a price. And if you want a kind of wordplay, a kind of rhyme that makes sense for me, I like to say that it has both use and price. The phrase exchange value is traditional and I won't at this point say why I think it's a little bit misleading, but the gist of it is that Marx says on the one

hand the product is an object with a use, it's also a social thing. He uses that exact phrase any number of times. It's a social thing with a price. The word exchange value for all intents and purposes at this moment means price. So it's really that simple. Now in what sense is there a contradiction here? Well, I was alluding to that earlier. The product has a use whether it has a price or not. But when it has a price, it's as if there's a force field around the product. Again, you have to have money to clear away that force field to gain access to the product. So its use is sitting there on the shelf,

but if no one approaches it with money and a great, great many things in our society are produced for sale and fail to sell, grocery stores every single day throw away food they were unable to sell. And that is in circumstances often when there are food pantries that need donations. That is in circumstances where there are people who would greatly value having access to that food.

But a commodity is only something that you can access if you have the wherewithal to buy it. From Marx's standpoint, that means that the use of the commodity is, in philosophical language, negated in those instances. It is inhibited. It is blocked. And Marx argues that if we regard the purpose of the economy as the satisfaction of human needs, then the social status of the product as something with a price gets in the way.

I mean, need is not satisfied in countless instances. Yeah, no, absolutely. And I really appreciate this idea of how exchange value blocks the use value, right? Like, I think that's such an important insight into how capitalism works and this idea that the purpose of an economy should be to satisfy needs, but that capitalism cannot achieve this much of the time at least because price gets in the way

of use because things are produced for the purpose of being sold, not for the purpose of satisfying needs. I think that's such an important early insight by Marx. Like he made this insight so long ago. I can throw in one other point too. It's traditional to say that there's the, on the one hand, the use of the product, on the other hand, it's exchangeability. Something else I'll point to,

it has to do with what it is that Marx was really hoping for by means of the critique of commodity relations, by means of moving us towards a future where the sale of the commodity is not what determines our fate. You can say it's on one hand use versus price, but Marx didn't want the product simply to be used. He did want it to be used to satisfy human needs, but he wasn't thinking individualistically. Obviously, very happy to have people satisfy their individual needs. And he's not envisioning a future where people are forced to share mechanically.

But the distinction that Marx makes really is between a society which revolves around selling and a society which revolves around sharing. And so the impact of this contradiction is very clear when we consider the great power of the productive forces that have been unleashed in the last few centuries. We are at a point in history now, and I think this has been true for a while, where our capacity to produce countless kinds of goods, deploying countless skills. I mean, people have mastered an incredible range of arts and technologies. At this moment, there is no real material reason why all basic human needs shouldn't be satisfied.

All eight billion people on the planet can be fed and sheltered properly. There's no material limit to that goal. The obstacle preventing all 8 billion people from having what they need is simply, again, the fact that rather than sharing what we produce, our premise is that we must sell something in order for it to be used and not enough people have enough money. Absolutely. And I think it's so important also to remember that we're not just critiquing to critique, right? But we're also presenting the vision of something different,

another way of organizing society, which really was Marx's goal. OK, so that's the commodity. And that's also the idea of production for exchange. And just something I wanted to touch on too too before we move on from the text, which I thought was super fascinating, is that during Aristotle's time, so let me just quote from the book here, you're right. During the lifetime of Aristotle, circa 2020 BC, commerce was a lively but very minor part of overall economic life.

Economics, in fact, is the name Aristotle applied to production for use production for exchange. Aristotle called crematistics. So I just thought that was a really interesting little passage in the book. And it is interesting to think of how we live in a world defined by price, right? And that this was not always the case. And maybe I'm getting a little bit ahead of myself and foreshadowing a little bit our conversation where we'll touch on commodity fetishism. But I just wanted to share a quick personal experience because I feel like it's super

relevant. So, we moved, my partner and I recently, we moved to the mountains and during the move at our old place, I was loading up a bunch of my house plants, which I have a lot of, into my truck and one of our old neighbors at our old place walked by and looked at my truck bed full of these potted plants and was like, wow, now that's money.

And I don't know if he just thought I was loading them up to sell them or what, if he just saw dollar signs when he saw the plants, but I just immediately thought about what we're talking about now, this distinction that Marks makes and how we look at things. And to me, I like plants for so many reasons and absolutely none of those reasons are because of their resale value. But of course, not to say that I don't look at the world through exchange.

We all do. I mean, it's the water that we swim in. But it was just so interesting to think of how so much is alienated by this dominance of price, right? It's this idea of the alienation of use. But yeah, so just to keep moving forward, so we've looked at the commodity, we've explored it as a common oddity, it's double life. We talked about, of course, the alienation of use value, which I just mentioned.

You've also introduced us to the logic or illogic really of overproduction and how it's really a result of how exchange value eclipses use value as you write in the book. And so where do we go from here? Well, here's where we can introduce labor and labor is what gives value to the commodity and drives the exchange process to begin with. And in order to understand labor, we have to get a little abstract, literally actually, what Marx calls abstract labor. And so it's important to know that labor is sort of the common element within all commodities that allows them to be exchanged. And with that, can you set us up for the conversation about abstract labor as we continue moving forward in sort of building these blocks that Marx is setting

up for us here? Absolutely. So the structure of my book in some respects simply replicates the structure of capital. And so chapter one, which is clearly the foundation, we have to understand the basic concept. Chapter 1 has four sections, and this is going to be a little bit technical, but I think listeners will learn from this. The first section is the twofold character of the commodity, and that's what we were just discussing, so-called use value and so-called exchange value. So corresponding to each of these two dimensions of the commodity is labor perceived in a different way. And this is where the

discussion gets a little bit complicated and I'll return to that in a moment. Section three is the section which discusses how people actually experience the world of commodities. What they see when they look at their own commodity, the one they themselves have produced, what they see when they look at their own commodity, the one they themselves have produced, what they see when they compare it to others and when they assess its value in money. So the twofold character of the commodity, the two dimensions of labor that correspond, then how people see and feel about commodity relations, and then the famous section four on the fetishism of the world of commodities,

which is where the concept of the intricacies and sort of oddity of the commodity becomes clear. I'll step back a little bit further from that. Immediately after Marx discusses the commodity, he discusses its relationship to money. Again, as I said earlier, when you say commodity today, you're also effectively saying money. And again, money is the oxygen we breathe. Money is also capital. Capital is nothing other than money which is invested to produce commodities by means of hiring workers and buying means of production. So those three concepts go together

integrally, and all of them pivot around Marx's concept of labor under some circumstances as abstract labor. Now I will make an observation about Marx himself and that is that Marx was actually never a teacher and he wrote thousands of pages of incredibly thoughtful, insightful, nuanced analysis of all these questions. I've heard all of the criticisms from the philosophers, the economists, and many others who think they have found the flaw in Marx's reasoning or feel that he's guilty of some simple stereotypical error like falling into the crevice of economic determinism. Suffice to say, if you

read Marx carefully, I don't think you're going to find evidence that justifies those kinds of criticisms. But it is true that in the second section of chapter one of capital, Marx's vocabulary sounds unusual to people. And it's particularly that phrase, abstract labor. And this is not an incidental concept for Marx. He says in the German original that this is the very spring-punked, this is the very pivot of his theory. And so when I have talked to people, students and others

in the past about abstract labor, usually eyebrows are raised. I mean, everybody knows that labor is labor. It's something that you do physically. It's something that you do mentally. It happens today. It happens tomorrow. It takes you 45 minutes or it takes you an hour. That is exactly what Marx means by the phrase concrete labor, which he also calls useful labor. Again, this is something that is as clear as noonday, he says. Any child understands the concept of working, the physical concept of working. But labor has a social status that corresponds to the

exchangeability of the product. So the labor that bakes a loaf of bread is very clear. You can videotape it. There's the baker preparing the dough, doing all the steps to prepare the bread. At the end of the process, you have bread, which is a very straightforward and important use value. There's nothing complicated about that. But in what sense does labor go into the price of the product? And I think Marx made a little bit of a writing error when he chose the word abstract because it tends to cause people to doubt the credibility of what he's arguing. But what he's arguing is pretty straightforward. And that is that the price of the product is a function of the amount of time and energy it takes on average to produce that product.

So I'll say a few additional words about that. So let's suppose that I'm baking bread. I'm planning to take loaves and loaves to the market on the weekend. And there I am in the kitchen with gloves on, whatever, taking all the obvious physical steps. And suppose it takes me, I'm making say 40 loaves of bread, I'm going to go to the market on Saturday, and it has taken me seven hours and five minutes the first day, and the next day it took me eight hours and 11 minutes.

That's concrete. I mean, that actually happened. Again, you could videotape it. It will never be replicated in exact details. Every instance of useful labor is concrete. It is not something that you can see as being an instance of something average. It's what you did. It's what I did on that particular day. But let's suppose that I go to the market and I've been working an average of eight hours a day and I'm hopeful

that the price I'm able to realize for the bread will be commensurate with that effort. If I go to the market and I discover that while I was daydreaming while I was in the kitchen, I discover that a better quicker means of preparing the same kind of bread has been developed by somebody who's basically a competitor who comes to the market with 80 loaves of bread produced in the same time. So I worked 40 hours a week, the other baker worked 40 hours a week. I bring 40 loaves to the market, the other baker brings 80. Can I tell people, well look, I work just as hard as the other baker. I should get as much reimbursement, as much compensation for my 40 loaves as that other baker gets for

80 loaves. And unfortunately, the market has no heart, but it does have a calculator. And it understands that what matters in the market is how much work it takes to produce something on average. So I could be faster than average or slower than average if I'm faster than average like Einstein when he worked in the Swiss Patent Office. I'm sure you've probably heard that when Albert Einstein was young he actually worked, he had a wage-paid job in the Swiss Patent Office. He actually later wrote a really good essay about Marx's theory of value for what it's worth. But he was a very efficient worker in that office.

And so he finished all his work by noon, and then he could theorize about physics in the afternoon. And from the standpoint of his employer, he was a perfectly average employee. He got as much done as anybody else. In any event, people would love to be rewarded for the effort they really make. So you showed creativity in your work. You had some unexpected thoughts along the way about how to do things a little bit more efficiently or a little bit more creatively.

It would be wonderful if we were rewarded for our effort, our creativity and all of that. But when you get to the market, you discover that a loaf of bread is a loaf of bread is a loaf of bread. I actually quote Gertrude Stein in the book who famously said that a rose is a rose is a rose when she was in her basically surrealist phase of writing poetry. From the standpoint of Mark, every loaf of bread is just like every other loaf of bread. What you did isn't relevant. And a really critical instance of this has to do with advances in technology.

So one of the examples Marx gives, which is really most telling, revolves around the labor of a handloom weaver. A lot of the weaving in the 19th century was still done by hand. So a handloom weaver for 20 years has been making linen and bringing yards of linen to the market for 20 years. The average amount of time and energy it requires to make a yard of linen hasn't changed for 20 years. So everybody knows what the average is roughly.

And if they can be a little bit quicker, they have a few extra minutes of free time. If they're a little bit slower that day, oh well, they'll try to make it up sometime soon. But then, unbeknownst to all of the weavers who traditionally sell their product in the market, the parallel to the baker who has an innovative method appears on the scene. This is historically a very important development. All of a sudden, the power loom was developed. And so eight hours of hand loom labor is suddenly the equivalent of about 20 minutes of power loom labor. So I could take my my linen to the market and try to get the same price that

I got for it before, but the power loom weaver is out producing and underselling the other competitors. So the concrete labor that went into the linen last year and the year before is more or less the same. I mean, not exactly because it's concrete, but the amount of labor that it has taken on average for year after year after year has been roughly the same. The abstract labor so-called is the average amount of time. So Marx's argument is that the value of a yard of linen has fallen dramatically and the price falls dramatically because the productive technology has advanced and the cost to the producer has dramatically fallen. So independently, what I did, the concrete labor I did, the social labor, the average labor that is imputed

to the product has changed dramatically. The concrete labor remained intact. The social status of that labor changed dramatically. Thank you so much for that. That was one of the most clear illustrations of abstract labor that I think I've ever heard. And I just want to reinforce it with a few passages from the book. So in the book, you distinguish useful labor and abstract labor, useful labor being work activities as they really are with unique material qualities, and this kind of labor

is embodied in use value. And then abstract labor being work activities treated as if they had no distinguishing qualities and embodied in value or price or exchange. So I'm quoting here from page 47. When tailors and weavers exchange products, for example, they view their work not as it really is, but as work, pure and simple, as labor per se. Equating one coat to twenty yards of linen means equating coat-making, the labor of a tailor, to linen-making, the labor of a weaver. The products are equated, and so is the labor that goes into them.

Trading products means treating them as equal. Sans qualities, or without qualities, all labor is alike. X hours of one type of qualityless labor is equal to X hours of one type of qualityless labor is equal to X hours of another type of qualityless labor. This abstractness permits exchange. Equal quantities of abstract labor may exchange for one another. With the fact of exchange itself, abstract labor is certified as real. The product proves itself to be a commodity, an embodiment of value." And then you go on to explain how people don't know that they are doing this, but that it happens nonetheless.

And I think that's a really important part of it. This idea of abstract labor is not conscious, but it is actually in a way how we think about the value of everything. Okay, so I hope that folks are following along with us so far, and again, if you need to spend a little bit more time thinking about this idea of abstract labor, hop to chapter 6 of Marx's Capital Illustrated. It's important to understand this before we move forward. Okay, let's move ahead now and talk about a concept that we touched upon earlier, and

that is fetishism. Can you tell us what commodity fetishism is and why it's important? The theme of commodity fetishism is what really held my attention when I first began reading Capital. It's an exotic sounding phrase phrase and it turns out to be extremely meaningful from any number of standpoints. So for example, a lot of people think of capital as being like an economics textbook. This is the book where you learn about prices and values and all of the sort of standard economic concepts. When I said earlier that the commodity is an oddity, that largely

connects to the theme of fetishism. Because it turns out that unexpectedly when I first read chapter one of capital, particularly when I read section three and then section four, I discovered that Marx is not just talking in the ordinary economic terms about how prices arise in society. His most fundamental interest is in the future and whether or not we will continue to have a society that is based on selling or whether we will get to the point where we decide to meet everyone's needs in some form of democratic humane sharing. And in order for that to be possible, people have to see beyond the current horizon of possibility. So Marx says that what he calls fetishism is the belief that what is inherently social, the

belief is that it's actually natural. So for example, if it is naturally true, if it's simply a fact of nature that products must sell before they can be used, if it's natural for products to take the form of the commodity, then hope for transcending that reality is basically out of the picture. Marx's argument is that the obstacles we face are socially constructed. It's the decision that

society tacitly makes every single day to prevent sharing, to require selling. If there was a sudden global amnesia that affected all eight billion people on the planet. We could wake up the next day and forget what a prize was, forget what a QR code is, and simply see the world around us and resolve to make and share what we need. Now, a lot of people will instantly regard that as a deeply utopian goal. And I don't think Marx would disagree on a certain level. I mean, the word utopian might not appeal to him exactly, but he was well aware that he was envisioning a future that qualitatively transcends, that qualitatively differs from our current society. What he felt was realism was thinking through what it would mean to get from here to that future.

If we feel that capitalism has a limited lease on life, I think there are good reasons to think that ultimately capitalism will cease to function properly. It already has obviously shown a great many problems. If we consider the possibility that organizing production and on a global scale by capitalist means is leading us towards climate collapse, then realism is not simply adapting ourselves in some way to the present, which is what the legions of people who argue for narrow realism would say. They would say you have to fight for something that you can get in the immediate present. You don't want to confuse matters by aspiring to something too perfect to be possible.

Well, Marx differs. He believes that our realism is the kind of realism that will lead us off a cliff. That many, many good and sensible decisions in the presence, which take selling and profit as their end goal, are leading us towards catastrophe. So it's fundamental to consider what people think is possible. So if people think that it's natural and inevitable for there to be commodities, A sort of more normal way that people would phrase that point is to believe that there will always be money in society. Now this is a leap for most people. It's extraordinarily difficult in a world where money is in the air we breathe, where money is inherent in almost all of our concerns and decisions.

It's very difficult to imagine a world without money, but Marx very strongly believes that money will lead us down the path to destruction. And so we have to go beyond simple realism. I'm a strong advocate of every kind of realistic effort for reform. I've been involved in a campaign for a local living wage ordinance. I was involved in a campaign to raise the minimum wage. I've been involved in any number of such campaigns and have put years of effort into them. Now, those are small. The total number of people who are ultimately affected when we win those struggles is a small number. And so that's an instance of the kind of realism that some people would say is the only kind of realism we should use. But Marx says, over and above doing what we can to help people and defend ourselves in the here and now,

we have to think into the farther future and prepare ourselves for survival in the longer run and that means thinking past money thinking past Selling and again people will recoil in many instances It sounds too good to be true to utopian to be possible and I don't think it's in doubt that Marx's vision is extraordinarily difficult not only to imagine, but much harder to achieve. He believes it's possible. Does he think it's probable? Well, I can't speak for Marx. I personally do not think that what I'm proposing is even probable.

It's certainly not inevitable. But if we are speeding towards catastrophe in many fundamental respects, if we are already living in a world of poverty amidst plenty, I think that making the effort to realize that possibility is worth the effort. So commodity fetishism is the belief that it isn't possible, that it is inherently impossible to have a world without money. It's inherently impossible to have a product that not only has use, but price. If you think that it's inherent in society that we have money, then what you're also saying is that it's inherent to have a world where money gets you access to use values,

where money gets you food and shelter. Marx believes that's our reality now. He did a great deal of reading in the ethnological and historical literature, and he knew a great deal about the anthropology that you studied. And he knew that there were many, many peoples in many parts of the globe over many centuries who actually lived in societies that did not have money, that did not have selling as a defining principle, where the concept of a market would have been a meaningless concept, because these were small-scale societies

where people produced for use and they produced to share in all kinds of ways. Marx didn't idealize those societies. A lot of them were highly patriarchal, for example, but nonetheless, they were an index of the possibility of something along those lines. And again, most critics would say, but in a small scale society, that might be possible, but in a society where you have a city with 30 million people, where you have dozens and dozens of cities worldwide with 10 million or more people, where you have a global population of 8 billion, you're talking about something that is simply not possible. Well, again, Marx differs. Difficult? Absolutely. In some circumstances, for many people, almost

inconceivable. And that's his point. The analysis of commodity fetishism, the critique of that fetishism, is the attempt to show that what people think in many, many instances is natural and inevitable. Something we can't get beyond is simply, in fact, something that we create and recreate every single day. So this conversation on fetishism actually evokes for me this idea of capitalist realism that was an idea popularized by the philosopher Mark Fisher. We had an episode on capitalist realism

with Carly Gomes from the podcast Hit Factory. And it brings up many recurring themes also that we explore on the show. We often talk about Margaret Thatcher and we have a sort of a running joke that every time her name is mentioned, our listeners can take a shot. And if you don't drink alcohol, then you can take a shot of I don't know, pickle juice or something. I love pickle juice. so it's definitely not a step down But this famous phrase that she has which is that there's no alternative, right? And it also invokes this idea of like the end of history and you know

Really just this idea that if capitalism is going to work It needs to have us under this spell and I think it's really interesting that Marx used the word fetish, which is originally associated with religion. And you talk about this in the book, you write, quote, the word fetishism denotes the belief that particular objects, say religious idols or gold bars, have mystical powers. A fetish is precisely such an object." And then of course there is a big picture of Gollum from the Lord of the Rings in the

book looking at his precious ring. And so I just thought that was a really nice way to illustrate this idea of fetishism and also I really appreciate the way that you presented it here and it really does evoke this idea again that we need to be sort of tricked. There needs to be a sort of veil pulled over our eyes in order for capitalism to work. And again, I just want to pull out a couple more passages from the book in order to reinforce some of what you spoke about and also to contextualize it and give us a sense of why we're even talking about commodity fetishism here in the text.

So you write, despite the fact that, quote, commodities appear to relate to each other naturally and spontaneously, what really happens is that society divides its labor between a multitude of private producers who relate to each other by exchanging their products. It is this process which transforms simple use values into magical values. Though commodities and money do have special powers, these powers are not natural. This is, however, what people imagined. Seldom is it realized that money and commodities only have the power of exchangeability because people relate to each other as private producers.

Producing in isolation from others working privately, producers must produce for exchange. Only by exchange can products change hands. Without exchange, a private apple grower would have only apples. To get wine, books, shoes, and other products, producers must burst from the shell of their privacy at least long enough for exchange to take place. No one producer can use indefinite quantities of any one use value.

Beyond a certain point, the producer's product becomes a non-use value for the producer, something of redeeming value only in exchange, where it appeals to some other producer as a use value. The appearance is that apples exchange for money and thus indirectly for wine, books, and so on, naturally, as an expression of their inborn exchangeability. Commodities seem to attract money just as a magnet attracts iron. It seems natural for commodities to have particular prices to be, quote, worth just so much, no more and no less. This is fetishism.

And so fetishism, and that's the end of the quote, and so fetishism, this almost religious devotion to this mystical idea of exchange, really is the spirit that infuses capitalism and allows it to function in the way that it does, in the totalizing way that it does. Okay, so moving along here, we've come to the section on money. And so you've brought up money already, we've talked a little bit about it, and you've summarized this earlier, but just for good measure, as you write in the book, value exists in three forms. Commodities, which we've discussed, which are use values produced for exchange,

essentially embodied labor, and two, as money, and three, as capital, capital being money used to generate more money. So to discuss capitalism, we must begin with commodities and then move to money. So tell us about money, how does it emerge from the exchange of commodities? Well, Marx argues that historically everywhere that commodities have appeared and they did arise, you know commodity exchange arose

independently in any number of places in the world. I mean there were pre-modern cultures in the Americas particularly in Central America where commodity exchange gave rise to money. There have been many societies that initially engaged in barter and ultimately generated money relations on a grander scale. This is actually relevant to one of Marx's, again, more utopian sounding views because a lot of people have thought, well, perhaps we could sort of scrape away money and then have like a democracy of commodity producers.

So everybody produces their own product and they take it to the market and there's equality between the exchangers. And that was actually a viewpoint that was strongly expressed by one of Marx's contemporaries, whose name was Pierre Joseph Proudhon. Marx was convinced that where you have commodities, if you have commodity exchange on a grand enough scale over time, money will be generated. So if you peel away money at any given moment and you revert to commodity production, you're still selling and sooner or later, one or more of the commodities will stand out from the rest as the one that everyone will accept.

So again, Marx's view is that we should have neither money nor commodity exchange. Again, he favors a society of sharing, not selling. So then how does money arrive? Well, the money story is complicated and many critical things have happened in the realm of money since Marx's lifetime, but I'll start just by focusing on his analysis of historically where money came from. So Marx says that initially commodity exchange is essentially barter, and barter can simply involve two people once and then never be repeated. But in many cultures where commodities are produced,

commodity exchange becomes regularized. Marx gives a couple of examples in Capital. He says that commodity exchange often arises at the borders of cultures. So a famous example that Karl Polanyi called attention to is the exchange of salt in Dahomey in West Africa for products produced by neighboring peoples. So very often one particular people has a specialty in what they produce and a neighboring

people produces something that they covet. And so they work out a regular way of exchanging product A from product B. Marx says that he uses the word that takes the uncommon English form of interstices in section four of chapter one of capital to say that commodity exchange often happens, like in the nooks and crannies, in the in-between areas of a culture when sharing is still the main principle. But in those instances where commodity exchange has grown to a large scale and has become regularized, commodity exchange elbows aside direct production

for use and sharing. So then at a certain scale, commodity exchange becomes unwieldy. So in the example he gives in chapter one of capital, he says, suppose you're a weaver and you're taking your 20 yards of linen to the market and you discover there that your 20 yards of linen is worth one coat. Well, okay, that's useful information for an exchange against that one product.

Marx calls that other product a particular equivalent, one specific thing that is equivalent to yours in terms of the amount of labor socially average in that product. But what about what if we want some coffee as well? What if you want a pair of shoes? So it turns out that your 20 yards of linen is equal to one code is equal to two and a half pounds of coffee is equal to and then the equation continues. Basically there's a universe of other products out there, a universe of other products out there, a universe of other particular equivalents. And so your 20 yards of linen has a different relationship to each of these other products. All of them are exchanging in proportion to the

average amount of time and labor that goes into them. But there's no, as I said earlier, no master key that enables you to simultaneously assess the value of your product and all other products at once. And that is what money permits. So Mark says that over time, certain specific commodities stand out from the others and they are commodities which may be valued above all for their usefulness. So in some cultures cattle played the role of money and in fact the word capital for what it's worth derives from cultures where cattle were the main form of money. The word capital

comes from heads of cattle, capita, per capita. And like the word pecuniary, which is not very often used but refers to matters financial, derives from the Latin for pig, which is pecus. So livestock of various kinds have sometimes been the universally treasured commodity that everybody is willing to accept in exchange for whatever it is they've produced. In some cultures, shells have played that role, and there are instances where shells were regarded as sacred. If you hold a shell to your ear, you can hear the voice of the spirits, the voice of the gods. And so a kind of religious dimension is associated with

shells in some cultures. Actually, there is reason to think that gold first became the really unique money commodity, partly because it's so malleable that it could be molded into the shape of shells. So it was actually the shell that came first. In any event, without belaboring the point, in different parts of the world, different specific commodities, and very clearly gold and silver are commodities. They require mining. There's a quantity of real concrete labor that goes into them and also a socially average amount of labor that is imputed to gold and silver. In any event, to make a long story short, as a result of the historical process And to make a long story short, as a result of the historical process that Marx is describing, the world of commodities gives rise to that unique commodity that plays the role of what

he calls universal equivalent. So this is the product that everyone will accept and return from theirs. And this is where some of that Golem-like fetishism in a broad sense enters the picture, because it begins to seem after centuries and centuries that there is something absolutely magic about gold, something unique beyond ordinary affairs. So if you were to walk into a room and find two equal piles of metal, one of which was iron and the other of which was gold, It's very hard for anybody living in our society not to have their heart skip a beat when they see a stack of gold.

Whereas if they saw a stack of iron, they'd think, who put that there? I'm going to trip over it. And let me just say one further thing about money. I was basically rehearsing what Marx tells us about money. And for anybody who's interested, the chapter on money and capital is remarkable. It is subtle, powerful argumentation. Marx actually wrote a precursor volume

to volume one of Capital called On the Critique of Political Economy. And he has a 120-page chapter in that book on money. And it's one of the most remarkable documents I've read. It's Marx and his finest. At the same time, I do want to point out that since Marx lived, a great many things have happened in the realm of money, including society going off the gold standard.

And it would take us a long time to discuss the significance of what's happened with money and all the ways in which we're familiar with it. I was talking to some of my students recently who said that to them, money that takes physical form like coins and bills seems like play money. It doesn't seem real. They said that real money is the money that's in your bank account that all the institutions can keep track of that determine your credit score in any event. So a great many things

have happened in the realm of money, but money is still the universal index of where the value of your commodity stands with respect to the value of all other commodities. So whether it's electronic, whether it's physical, money is still the simultaneous mirror of your product and everyone else's. So if you want to know how your product compares to the value of any other product, the money number will give you that answer. So again, money then for Marx has a number of different functions. The simplest one, the one that we all know from everyday life, he calls means of purchase. So you need to buy something and money is the means by which you make that purchase.

But many societies have been monetized for centuries and longer without ever having their money function as capital. So there is a fateful moment historically speaking when initially in the Italian city-states to some extent in the Netherlands and Britain and Spain and elsewhere all of a sudden people with money realized that they could hire workers with that money. And of course, that had always happened here and there. I mean, the possibility that you can hire somebody to do something in exchange for money, that always exists wherever you have money.

But that principle didn't catch fire on a society-wide scale until the relatively recent past, the commercial revolution of the 12th century, many things that have happened since then, and then the rise of what we think of as capitalism in the modern sense, which begins in the 16th century and has now encircled the globe. That historical development has enshrined the role of money as capital. So again, what is capital? For Marx, capital is very simply money that organizes and pays for the production of commodities. We live in a world where everything is a commodity that we need, and those commodities are produced

by workers who are hired by capitalists. And this is a fundamental importance from Marx's standpoint because his argument is that when we as workers enter the labor market, we are actually still sellers of a commodity. That commodity is what he calls labor power. And actually Marx has done us a favor. There are a lot of compound German nouns that are very handy to use.

And that's not typical in English. A typical English phrase would be to say the power of labor. But in German, that word is arbeit kraft. And it got Marx translated into English as labor power. And it really resonates with that phrase. So the question is, when you or I go into the labor market and we are seeking a job, Mark says we are offering to sell our labor power for a wage. And he really means literally, sell our labor power. Now we're not selling ourselves body and soul into

chattel slavery. What we are hoping to do, what we are succeeding in doing in many instances, is we are hoping to do, what we are succeeding in doing in many instances, is selling our time and energy for a given number of hours per day, a given number of days per week. And so this is the most familiar and ordinary reality that we experience in some ways. I have long since found that when I talk to students about this subject, they take this more or less for granted. I mean, this is just elementary reality. I mean, why do people go to school? Well, in the hope of getting a degree, which will help them qualify for a better wage. Why do people go to college? Well, they want to, you know, get a profession where they can get paid decently. So the idea that we are immersed in a

world where we're selling our labor power is something that we aspire to. It's not surprising to people. But Marx says, think twice about what you're actually doing. And this is where the concept of alienation comes to life. Marx says, you go on a job market hoping to get a job, and you get that job. And what that means is that you're an employer. And the word employer means somebody who employs something, who uses something. What do they employ? What do they use? They use us. So your employer is literally the owner of your time and

energy when you're at work. This is literally the case. So Mark says you're selling your labor power. You haven't done any work yet for the employer. What you're selling is your time and energy. And then you are basically under the thumb of your employer who has the opportunity to tell you, well, push that mop or clean that counter or fix that car. I mean, basically you are entrusting your time and energy to an employer and it belongs to your employer. So I've actually had

this exact conversation long ago where one of my employers said, look, what you do on your time is your business, but what you do here is my business. And that couldn't encapsulate the point more clearly. What I did on my time, in other words, after I clocked out and I went home or went walking after work, that's my time. I can do what I wish. But when I'm on the clock, when I'm at work, I am supposed to be doing what my boss tells me to do and only that. And right now there are countless forms of technology that monitor what office workers are doing, for example. So they count the keystrokes. They keep track using artificial intelligence of whether those keystrokes are playing a game online or actually doing work.

So the employer has a huge vested interest in ensuring that you do their bidding when you're at work. And again, this is not surprising to most people, but it's really worth having in the foreground of our thinking. And it helps us better understand what Marx meant by that phrase, alienated labor. Now, there are two German words, actually three German words that essentially translate as alienation. I'm only going to be focusing on the one that matters most for capital. And I'm only going to be focusing on the one that matters most for Capra. And I'm only going to be focusing on one of Marx's uses in his prologue to capital. He wrote a massive manuscript called The Grand Risa, which is basically the rough outline of

everything he was hoping to write. I actually read that once carefully looking for Marx's views on alienation. And I actually found that he uses those three words in more than 10 different ways. I think every one of those uses is interesting and relevant. But for the purpose of understanding Marx's core argument in capital, only one of those meanings of the word alienation is central and that is the concept of alienated labor which is easy to understand because what Marx is saying is that when you're at work and alien will moves your body you basically set your own will to the side I mean obviously nobody can do that completely

and people take breaks and so on. But the basic principle is that your body is moving at the behest of somebody else's will. So in the most literal sense, a will alien to your own is moving your body. And then when you've clocked out, when it's the weekend, what you do is your business. So then you decide whether you're going to watch television or take a walk in the park or hang out with friends. But when you're at work, the labor you do is alienated in that sense. OK, so I'm going to try and summarize everything and tie it together, at least in my own brain,

which often does struggle when thinking about some of these topics. But first, I'm going to do that after the intermission. So before we go to break, can you talk about how money, which we discussed a few questions ago, how does money come to dominate the exchange of commodities as capital? Like how does capital originate and become so dominant? What process took place that allowed money to be used in the first place to generate more money,

to serve as capital? And then after the break, we will begin the discussion of capital accumulation. But for now, how does money come to dominate and then after the break we will begin the discussion of capital accumulation. But for now, how does money come to dominate the exchange of commodities as capital? Right, well, essentially when capital enters the picture, if you're a capitalist and you hire workers with your money, you pay them a wage, and you purchase the so-called means of production, you know, machinery,

equipment, raw materials, rent some land, you are scaling up in terms of the productivity that's possible. So as with the example about the power loom weaver and the hand loom weavers, let's suppose that the hand loom weavers were independent producers. They were working out of their own homes producing commodities. The power loom owner is a capitalist who invested to produce this more powerful technology and rented a space that the capitalist turned into a workshop,

brings in workers, has multiple power looms constructed, and hires people to come in and operate those power looms. The power of that productivity, fueled by the capitalist money in the first instance, but the power of that productivity incomparably dwarfs what the independent producers can do. So if they were counting on eight hours pay for an eight hour day and then they discovered that the power loom has rendered their product worth no more than

about 20 minutes of daily labor on average, then they're within shouting distance of going out of business entirely. And if they're lucky then getting employment and giving up being an independent commodity producer. Marx gives a very telling account of how this affected the very large population of hand loom weavers in India when power looms and capitalist investment in weaving technology entered the scene. He said in a dramatic phrase that many of the regions of India were white with the bones of weavers who had starved. Once it turned out that their concrete labor was a very small quantity of average labor in a world where most production now was taking the form of production by power looms. So small producers get

driven out of business. The working class is constituted in a number of different ways. Like where do people who are willing to work for wages come from? This is a fundamental theme late in volume one of Capital and an essential theme as far as the argument goes, but also essential to understanding what has happened in the world in recent centuries and very much in recent decades. And that is what Marx calls the expropriation of the producers.

So the majority of the producers that he's talking about in the expropriation chapters are farmers who are often forcibly driven from the land. In the classic instance, warlords in Britain drove free independent farming families into the cities to take their land away from them so that they could raise sheep. Because at that moment, a market for wool was emerging in Bruges and elsewhere across the channel. So a great many people who were farmers were forced into the city. And what that means is that farmers who own their own labor power,

they're not anybody's employees. They own their own labor power. They also own their own means of production, most notably land. They are driven off land. They lose own means of production, most notably land. They are driven off land. They lose their means of production. The only thing left to them once they arrive in the city is their ability to work. Their labor power. So that process of expropriation is one of the means by which a pool of people available

for employment arises. The other is the one we were talking about a few minutes ago, and that is small independent commodity producers who are perhaps craft producers. Those craft producers are driven out of business by the basically unstoppable competition of the capitalist enterprises. And so they lose their means of production. There's no point in having a hand loom any longer when it's a world of power looms. So their means of production become meaningless and they discover that the only thing they have left to sell is their ability to work. So capitalism basically elbows aside every other form of production. And this is entirely unique.

Until capitalism arose on the scene, there was never a social system that had an encompassing quality that inherently grew and extended itself into every corner of the world. There were many other so-called modes of production, but they tended to be regional. They tended to be local. So you might have had something that was

technically feudal in 13th century France, and that's an important example, it's an important historical moment. But feudalism didn't inherently grow. What's distinctive about capitalism is that capitalists are in business to make money. They invest money to make even more money. And so this is the process that Marx calls the accumulation of capital. You don't, as a capitalist, invest money in the hope of simply getting back what you invested. The goal is to make a profit.

I mean, that's not a mystery to anyone. And that goal, the profit motive, has now encompassed the globe. Other forms of production have been swept aside. Farmers everywhere, to a very large extent, have been driven from the land, have ended up in cities by one means or another. And the consequence is that the majority of the human population on the planet right now either works for wages or hopes to work for wages. There is a very large pool of people who have lost their land without getting jobs. A contemporary term for that is precariat. That's a somewhat arcane term, but

it captures the same sense as a term that Marx used, which was what he called the reserve army of labor. So he said that the pool of people who either do currently work for wages or hope to work for wages so that they can survive and thrive includes people who have who have jobs right now. He calls that the active army of labor. But then there are all those millions and tens of millions of people on the production on the periphery of wage labor, who would love nothing more than to break into the world of wage labor, which to some extent qualifies what I was saying a moment ago about alienated labor.

Marx thinks alienation in that form is a cancellation of the human potential for creativity, that we become instruments of somebody else's goals rather than independent creators who have the opportunity to realize our potential as individuals. Marx feels that alienated labor does quash a lot of creativity and individuality. Marx is also very much an advocate of democratic relations in the workplace. And I don't think people would dispute that very few workplaces are anything like a democracy. The boss is the boss. Nonetheless, in a world where money is the master key to everything people need, if you don't have capital, your only alternative is to get a wage. And if you don't have capital

or a wage, you're likely to go hungry. And so competition from all those millions and tens and hundreds of millions of people who are unemployed at any given moment is another factor that also drives wages down. Because there are a lot of people out people who are unemployed at any given moment is another factor that also drives wages down because there are a lot of people out there who would love to have the jobs that those who are currently employed do now have. You're listening to an Upstream Smith. We'll be right back. on the barely moving water on an inland sea where people park their money I live year round in a vacation place I love the winter wind in my face harrowing beneath trees this big and groaning

No echo loud enough above the blowing All these absentee owners miss the huge embrace With pressing kiss of this specific November rain In the long darkness That's okay, I'll drink all the rain, well I trespass They keep their outside right on them I guess to let everyone else know Keep away this patch of night sky I also claim as mine

Don't they realize all I've stolen Well, this bill gone, scream gone There's lights that dark the hillside And sweet blinking eyes That was November Rain by Mount Erie. Now back to our conversation with David Smith. Okay, so to summarize what we talked about before the break, money is simply a super commodity used as the equivalent of all other commodities. And it can be used to purchase things and whatnot, but it can also be used to create more money. And when it's used to create more money, it's called capital.

And labor power is our ability to work, and it's also a commodity. It's something produced for exchange. Physical objects for sale, things like linen or coats, are embodiments of abstract social labour, which we discussed, and are also commodities. So in a sense, it's our labour power, a commodity, that is used by capitalists to create other commodities, like coats.

They buy raw materials, which start as commodities, but when deployed in this way are known as the means of production. So they buy our labor power as well, which is also a commodity, and we use our labor power to convert those raw materials into coats or whatever other commodities. And then capitalists sell those coats and somewhere in that process capital accumulates. That is, the value of the original money that was put into the process at the beginning by the capitalist comes out higher than before. This is what you were referring to when you said that capitalists are in business to make money, they invest money to make even more money. But I don't want to get too far ahead of myself here because we haven't talked about

how that value is increased yet. And spoiler alert, it's through a process known as exploitation. But it's this process of selling our labor power that results in the alienation of our labor. So we are alien alienation of our labor. So we are alienated from our own labor. And as you write in the book, the alienation of labor is a prerequisite for its exploitation. In fact, I'm going to read that full quote because I think it's super powerful. Quote, the money owner now strides forward as a capitalist.

The possessor of labor power follows as his worker. The one smirks self-importantly and is intent on business. The other is deferential and fearful. We are now speaking about the alienation of labor, the subordination of the worker to an alien power. As the direct outcome of the sale of labor power, the subordination of the worker is an intrinsic feature of labor power status as a commodity. Comprising a false freedom, the freedom to enter a subservient role. Labor's alienation is the vital prerequisite for its exploitation.

And then a few pages later you go on to write, By selling labor power, a matter of quote, free choice in name only, the worker surrenders control over labor. In this way, labor, the use of labor power, is alienated, just as the use of commodities is alienated in general. The difference is that labor, once sold, can never be recovered. Bread, though its usefulness is repressed while it awaits sale, can at least be eaten when it does sell. The use of labor power, by contrast, is most

fully alienated after its sale. Okay, so let's rewind for a second. So you described how labor, or how workers and their labor power entered into this historical picture, the reason why there is labor power for sale en masse in the first place, through this process of expropriation or proletarianization. Many might recognize this simply as the enclosure of the commons, which you referred to, a process that took place over centuries in England and had to do with powerful people taking the land of the peasants and using it to raise sheep for wool to be exported abroad.

It also had to do with closing common land down so that people couldn't hunt and scavenge and stuff on what was always for centuries prior to that common land available to all. But it's a process that did not only occur in England, and I think it could be interesting maybe to get a little bit more deeply into this process of expropriation, all but it's a process that did not only occur in England and I think it could be interesting maybe to get a little bit more deeply into this process of expropriation because it's just a super interesting topic and it's of course where the famous line by Marx expropriate the expropriators comes from and you do spend a great deal of time over several chapters in the book on it so yeah I

actually think it's one of the the longest chapters in the book is the chapter on the creation of the working class. So yeah, I'm wondering maybe if you can just talk a little bit more about this origin of capital. I mean, the historical chapters at the end of capital ask the question, where does available labor power come from? I mean, how does it happen that people with money find workers available on the market who are willing to sell their labor power? And that forces us to think about that theme of expropriation. And expropriation in Marx's vocabulary is about the displacement of farmers. And people use, you know, like, vocabularies like the peasantry and so on.

But in the simplest terms, we're talking about farmers. And until, you know, the industrial revolution, until capitalism got off the ground, this was a world, for the most part, of farmers on every continent. And what we have seen as part of the historical dynamic that includes the development of capitalism is the expropriation of farmers everywhere. I sometimes say that we're a world of former farmers and it's very rare for a farming people to willingly part with their land because Marx's argument is that farmers own their own labor power. They are independent. They obey their own will and they own their own labor power. They are independent. They obey their own will. And they own their own means of production. And the most important of the means of production is land itself.

So a lot of people in advanced capitalist societies tend to think that urban life as a wage earner is a more advanced social standing than the life of a peasant. I mean, we're accustomed to looking around the world and seeing vast rural poverty, which is largely a modern phenomenon. But it's easy to think that on the ladder of progress, that being a wage earner is more advanced than being a farmer. And farmers do not see it that way.

From their standpoint, they own their own means of production. They own their own labor power. They could support themselves independently of what happened in the market. They were vulnerable to environmental crises. If there was a flood or a famine, they would suffer. But they were sturdy and stood on their two feet, and they coped as well as they could, and they thrived for centuries on every continent.

What happened that was absolutely fateful was that in countless ways, and for the most part this has happened in the last 75 years, I mean the famous examples that Marx gives are focused on the origin of the mass expropriations of farming peoples and he focused on England in the 16th century particularly. But he was very well aware that as a phenomenon that's essentially an adjunct interwoven with the growth of capitalism, not exactly a consequence, but very closely connected, that farmers the world over have been forced from their land, their land has been taken away from them. And when that happens they find themselves masked in cities where they no longer have means of production. The only thing they still

own is their labor power. And so if they hope to survive, which requires money in our urbanized world, they have to sell their labor power for a wage. And that is a staggering level of precarity At any given moment your employer's whim or a recession or a depression Can throw you out of the your out of employment and at that point? Well, how do you survive? Where does where does your next meal come from? Farmers even in the midst of a famine, have neighbors to rely on. Historically speaking, in India, for example, village communities would be plighted by a major epidemic or a famine in one particular region, but they had

mutual support. So if there was a famine-stricken region, they would actually very typically get support from neighboring regions. When the British came to power in the 1760s and 1770s in India, they broke those connections between the different regions. And when a giant famine broke out, the support networks, the safety that had previously existed was eviscerated, and the consequence was mass starvation on a hitherto unseen scale. Something like 70 million people died in the first famine after the British Empire disrupted the prior relations

of solidarity. So expropriation is fundamental. You would not have capital if there were not labor power to purchase. And it's the expropriations that have sent farmers into the city with no means of production. They have to sell their labor power. So expropriation is always the precondition for capitalism. And to the extent that capitalism started small in Western Europe 170 years ago, it has expanded outward until the point that it basically has encompassed the entire world now. So we are a world of former farmers.

All of that is fundamental. And I'll pause with respect to the theme of expropriation. It's the essential precondition. And I do believe that empirically speaking, it has happened on a greater scale in the last 75 years than in the centuries prior to that, by all kinds of means that we could discuss separately. So that makes me think a lot about reading

some of Walter Rodney's work actually, and also some of the work of Samir Meen and others who talk about this idea of underdevelopment. And I remember reading, I believe it was in How Europe Underdeveloped Africa, which is Rodney's sort of crowning achievement, in terms of how the networks that you were talking about, how they were disrupted. Like you were talking about communal networks, but there's also trade networks that were disrupted. So, and this is a very simplified version, but there would be some European power, which would come into an African region, and everything would be transformed and disrupted to begin to orient around commodity production for export and the trading networks that were established between different regions or different groups in Africa would actually be completely disrupted and everything

would have to go through what Malcolm Harris has described as the asshole in the middle, right? And that asshole would be the European power, which inserted itself in between whatever previously established local networks. And so that's another way to, I think, expropriate people of their means of livelihood, sort of enclosing and modifying what used to be these rich local tapestries of trade. And then all of a sudden, everything is turned into a commodity for export. Development has stopped.

The exports are manufactured abroad as well. So these regions don't even get to participate in this process of increased knowledge and technological know-how that comes with manufacturing processes. And then you have a situation that can just lead to very horrific and horrendous outcomes. Absolutely. That's my way of thinking thinking that's exactly right. And you end up with people like pouring from the countryside into these essentially depopulated areas that to the extent that they are still farmed,

they are farmed by mechanized agriculture. So people pour into the cities, a new kind of poverty emerges in the world that never formerly existed, the kind of urban poverty that is so grinding, so glaring. A lot of people think intuitively that the, you know, arc of history goes from poverty to affluence, and in reality what the expropriation dynamics and the capitalist dynamics had generated is a world of unprecedented poverty, unlike anything formerly seen. People were always scraping by. People weren't affluent in the modern sense in most farming communities, but they knew how to

flourish. Then they knew how to cope. And compared to what you see in the, in the like what Mike Davis called the planet of slums, what people like Walter Rodney and Rosa Luxemburg and David Harvey and so many others have documented is a kind of reality that's staggeringly harder on average over generations and centuries than you typically saw in a farming community that would bounce back from a famine, especially if they still

had those intact support networks. Another really key dimension of this, just while we're talking about the present, is that all this is now happening on a grand scale. Like take, for example, fishing peoples on the west of Africa. A lot of Japanese and Norwegian corporate fishing enterprises have basically overfished regions that formerly supported fishing populations. And so that, then the effects of global heating are driving people not just into cities, but into entirely new territories.

They become part of this diaspora of the world's migrants. And then that sparks all the kinds of political phenomena that we see where the various kinds of nativisms appear, and people don't want the expropriated, the environmentally displaced coming to where they live. But those migrations aren't choice. If you're forced off your land, and then the environment makes survival more or less untenable for populations of a substantial size. Migration is the, you know, barest, most elementary step to survival.

So again, this is partly why I like this sort of more multidimensional presentation of what Marx argues, and this is very essential to the last several chapters of Volume One of Capital, because it makes it really clear that we're not just talking about chemically pure commodity relations, money relations, capital relations. We're right back to the premise we began with, that Marx is trying to understand the movement, the dynamic, the motor of capitalism as a global system. And that's not an abstract thing. We're not talking about a kind of machine.

We're talking about a world where farmers get pushed off the land, where workers who end up, when those former farmers end up in offices or factories and they are pushed around on the job or underpaid or laid off or fired. That's not incidental to the argument. That is the substance of the argument. These are the people who have labor power to sell. Okay. So we have covered the process of the origins of capital. And so chapters 12 through 13 in Marx's Capital Illustrated is where you talk about a lot of not just what we talked about here, but you go into so much more detail and you approach it from different angles. And there's just so much from those chapters now that I'm thinking about it that we haven't actually gotten to. of the book if you want to learn a little bit more about that history of expropriation and the making of the working class which the text goes into great deal around the violent expropriation and sort of this formation

of the propertyless proletariat. But okay, so we've set the stage for the accumulation of capital now that we have discussed the process which freed money to function as capital in the first place. So this is chapter 10 in your book and it's titled the accumulation of capital and this is where Marx sort of begins to tie it all together. So you have commodities, you have abstract labor, money, capital, all of the components that we talked about. This is where we begin to understand how capitalism really functions. And so I'm wondering if you can sort of walk us through

what you go through in the first half of that chapter, chapter 10, and then we can get a little bit more into the details, I think, as we as we move along. Sure. And so it's chapter 10 in my book. It's part six in volume one of Capital. It's a really incredible section of volume one of Capital. I think a lot of your listeners would enjoy reading through that. Be that as it may, again, capitalism revolves around money, which is used to hire workers and pay them wages, and then to purchase the raw materials and equipment and machinery they need to produce commodities. So the there's a famous formula that I'll quote for you. The whole process begins with money, and so in English the symbol for money is just the letter M. And so that

money purchases labor power, let's call it LP, and it purchases means of production. We'll call that MP. So the standard diagram that people draw and I'm asking people to visualize while listening, there's an arrow from M to LP on the one hand and the MP on the other hand. And because the workers who are being hired have no means of production of their own, they have only had their own labor power until they got this job. The capitalist, by purchasing means of production for them to use, reunites them with means of production. So the capitalist purchases labor power, purchases means of production, and then combines them.

It's far inferior to owning your own means of production the way farmers do, but at least the labor power can now be expended using the means of production. And so whatever it is that this particular firm makes, your labor power develops the skills is applied to that task. So M by LP, labor power, and means of production. Then there are arrows from the MP and the LP to one big L. That L is the labor itself. So once the workers who have sold their labor power are now able to use their ability to work, working with that equipment, with those raw materials,

that's the labor process. And that is actually the moment where where alienation enters as well. Selling labor power sets the stage for working under someone else's direction in this way. But for what it's worth, that's the essential dynamic. I mean, nothing happens. The wheels don't turn unless labor power is expended. And so that labor power working with the equipment, materials, and machinery produces the commodities. So the usual diagram is C goes to MP and LP, combines LP and MP in the process called L, which is labor. What does labor produce? Labor produces a whole succession of commodities.

It's usually C with the subscript 1...n. In other words, an indefinite number of commodities. The capitalist is in business to make money, will want to produce as many commodities as can sell in order to realize a profit. So the elements are combined, the labor is performed, the result is a stream of commodities which then go into the market and let's presume they sell or at least majority of them sell and what that means is the capitalist gets a return on the capitalist investment. And the standard somewhat awkward phrase that people use when they draw this diagram

is they draw an M with a little accent mark next to it and that's pronounced M prime. So this is a little bit of the, in some respects, unnecessary detail, but I think it's a diagram that is very routinely drawn and captures the essence of it. Volume one of Capital is called, subtitled, The Production Process. Volume two is called The Circulation Process. Marx says that capitalism inherently consists of the production of commodities on the one hand, and then the circulation of those same commodities on the other hand. That means the transport of the commodities from the factory to stores. If they aren't transported, they can't sell. So Marx says that capitalism is the unity of the production of the commodities and then the circulation of commodities. But the whole point, once the products have been transported for

sale, when they do sell, the capitalists who may have invested, let's say, let's say the capitalists invested $100,000 at the outset. At the end of the process, the capitalists return is $120,000. So the initial investment is recouped, the full initial $100,000 of investment is recouped and there is a profit leftover of $20,000. Now, again, this is the reality we live in every single day. So nothing I'm saying except for the characterization of the diagram should be surprising to people. Everybody knows that you're hoping to get a job or you have a job and that your employer

hires you if it's a private business in the hope of making more money at the end of the day, which we're calling M prime in this case. But this connects to the accumulation of capital because this is just an initial production cycle. So after the initial stream of commodities has sold and the initial profit has been has accrued to the capital capitalist, this is the moment when reinvestment occurs. This is when capital accumulation occurs on an ever-growing scale. So M initially was $100,000 invested. M in the second phase is $120,000 invested. Assuming a profit is made again, in other words assuming capital accumulates,

capital in the form of money that can be reinvested, then in the third cycle, the fourth cycle, over time that initial investment grows larger and larger and larger. Now of course many capitalists fail, competition forces many of them to the sidelines. But the system revolves around production by capitalist firms that are in business to accumulate capital. And at least a decisive number of them who stay in business, who produce the commodities we buy and use, they do successfully accumulate capital. So tall, tall mountains of money are ultimately accumulated. And that money is not only money that the capitalist directly reinvests. Ordinarily, the capitalist has borrowed money from a banker or a venture capitalist. So some part of

the surplus that accumulates is returned in the form of interest to a banker or in the form of rent to a landlord. But the whole point is to make more money and more money and more money infinitely. There's no material limit to the amount of money that can accumulate. And this is another way of thinking about the really radical difference between the material character of production and social production on a capitalist foundation. There is an absolute limit to how much we can produce on this planet. There is an absolute limit at any given moment to how much we need. We can satisfy all of the wishes of the eight billion people on the planet, and when we did that, we would still have reached a material plateau.

There would have been a limit, an ultimate end to the amount we need. There's no potential end to the amount of money that can accumulate, particularly given that money and that is now for the most part, numbers in a computer. Okay, so I just want to stay for a second on that return on investment. Well, it'll be a little bit more than a second, but that $120,000 that comes from the original $100,000,

which you mentioned. So at some point in the production process, and it's not in the selling process, this is crucial and we'll get back to this as well. At some point in the production process, there's an increase in value. This is profit, and it's generated through the labor process. I want to spend a little bit of time before we get into that, just summarizing and going over

what you explained a little bit in just some different terms and different angles just to help drive it home for everybody, I wanna spend some more time on the formula MCM. So in chapter four of Capital Volume One, the general formula for capital, Marx writes, the distinction between money as money and money as capital is nothing more than a difference in their form of circulation. The direct form of the circulation of commodities is CMC,

the transformation of commodities into money and the reconversion of money into commodities, selling in order to buy. So just to jump out of the quote for a second and to bring it down to eye level, this would be the sort of standard market transaction. You go to the marketplace, you have a commodity, let's say it's the linen coat that you made, you sell it to somebody for money, and then you use that money to buy another commodity, let's say pickle juice. And what happens in capitalism is different. It's inverted, right?

You have MCM instead of CMC. So let's go back to Marx here. Quote, the transformation of money into commodities and the reconversion of commodities into money, buying in order to sell. Money, which describes the latter course, what we just described, in its movement is transformed into capital, becomes capital, and from the point of view of its function, already is capital.

He goes on to write, the path CMC proceeds from the extreme constituted by one commodity and ends with the extreme constituted by another. Basically, he's just saying it starts with commodities and ends with commodities. Which falls out of circulation and into consumption.

So it exits the market at some point and turns into consumption. Consumption, the satisfaction of needs, in short, use value, is therefore its final goal. The path MCM, however, proceeds from the extreme of money and finally returns to that same extreme, which is money. Its driving and motivating force, its determining purpose is therefore exchange value. And then I'm just gonna try to simplify it again a little bit, I'm gonna quote

from Marxist Capital Illustrated. So you write, money used to generate money is self-expanding value or capital. We speak now of the initial M. Once invested, capital gives rise to surplus value, the difference between M and M prime. This surplus value takes three basic forms, profit, interest, and rent. A portion of surplus value pays the interest on M since it is likely that moneybags, who is the character that represents the capitalist that you write about in the book, since it is likely that money bags borrows

at least part of the initial capital, another portion of surplus value is used to pay rent, since it is likely that money bags rents at least part of the land or equipment he uses. What remains is profit, surplus value that accrues directly to Moneybags to use as he pleases. Profit can be used in two basic ways, either as dividends, for Moneybags personal pleasure, or capital, as fresh M, a second generation of M invested anew to generate another round of surplus value. And then you go on to write that, quote, Though the wealth of capitalist society presents itself as an accumulation of commodities, it is, in reality, an accumulation of capital.

Capital accumulation is the defining principle of capitalism, the economic goal and the process besides which all others pale into insignificance. Capitalism is just the nickname for the system of production based on the accumulation of capital." End quote. So I hope that was a bit helpful in sort of underscoring some of these ideas around how capital accumulates. And now I want to come back to this idea of profit. At some point, the MCM process, which we talked about, that last M, M prime, it increases. So it goes from $100,000 with the original M, the original investment, turns into M prime, which is $120,000.

And now you have accrued a profit. But where does this profit originate? So in Marx's Capital Illustrated, you say that profit, that surplus value is figuring that question out, is Marx's greatest achievement. And I want to go over where profit doesn't originate first, though. So it doesn't originate with the capitalist moneybags simply deciding to sell his commodities above their value. So if he did that, if he simply added a surcharge, there's nothing to stop all other sellers from doing the same, right?

And so I'm going to go back to your book here, you write, If this should happen, our friend Moneybags is at a loss. What he gains as a seller, he loses as a buyer. Swindling and shady dealing are rampant, of course, but in general, overcharging for products is disallowed by competition. Rivalry between competing capitalists for limited markets and profits tends to keep prices hovering in the vicinity of value. The result is that the commodities tend to sell for what they cost in terms of average

socially required labor, which we discussed in the first half of our conversation. Moneybags would of course like to overcharge for his products, but if he does, his competitors will cut into his sales by underselling him. What Moneybags gains with his surcharge, he loses in sales, if he isn't driven out of business altogether. Consider finally one particular instance of swindling. Suppose that Mr. A is ingenious enough to take advantage of mysterious B and C. Fine,

but will this produce surplus value? No, some gain may occur, but this is at the expense of the gentleman swindled. No new value is created. And then this is a quote from Eleanor Marx in the book. Value has changed hands, but it has not been created. And profits, to be real, must be newly created. It is self-evident that capital is not produced by cheating. And then you go on to write, When monopolies enter the picture, it changes somewhat,

but not fundamentally. Though it is possible for monopolists to raise prices above values, unconstrained by competition and thus free to reap windfall profits, profits, in general, are not the result of monopoly. Without monopoly, even when production is perfectly competitive, profit is still the name of the game. The accumulation of capital started, remember, on the basis of competition, so we must look elsewhere for an explanation of profit. Okay, so let's look elsewhere.

And here I'll toss the mic over to you and let you take it from there. Right, right. Yeah, and so just a brief comment with respect to your point about commodities to money to commodities. I tend to fast forward a little bit in conversation beyond that because it's really a relic of the past for the most part. But the conceptual difference between a process that begins with C and a process that begins with M is very significant.

In the classic example where Mark says of barter, where you're the weaver, let's suppose you're the weaver and you've got 20 yards of linen and you want a coat and so you go to the market and let's say you've got a roll of 50 yards of linen and you go to the market and you want a coat and you discover that you can get a coat for 20 yards of linen. So your motive there is consumption. Now, because you're a weaver, you've produced way more linen than you need

personally. So Marx uses, in Germany, has the phrase not use value. The linen is a not use value for you, but it's very much a use value for the tailor. So the whole point on both ends is to get something you need. Just humanly satisfy a need. And so when money interposes and it's not just one commodity facing another commodity, money is in between. So now you go to the market and you

discover that in order to get a coat you need $39.95 and it turns out that you can get that amount of money by selling 20 yards of your linen. So it's still the same essential relationship. Money is basically facilitating the satisfaction of human needs. Marx does not idealize that, but he does definitely contrast it to the case where money starts the process and money is the point of the process.

And in that process, those of us who sell labor power and do the work that produces the commodities that sell, we are in a situation where we work for our wage, but the actual labor we do is intended to profit our employer. And so where does the employer's profit come from? This is actually one of the more difficult technical arguments in capital and I was uncertain for a long time about how persuaded I was by all

the technicalities involved. I'm quite persuaded by this point but leaving aside some of the details, Marx says that profit comes, in his opinion exclusively, and I think he's actually correct about that, profit comes from the labor of the workers. And it's extremely simple to understand. There are two quantities involved. There is the value of what you produce at work and the value of what you're paid.

Marx says that when you buy a machine, the machine is bought and paid for all at once. He agrees that the average amount of time and energy that went into the production of the machine contributes to the production of the subsequent commodities. He agrees that the value realized by the purchase of that machine goes into the value of the commodities that are sold. But he says it's basically a wash that you get for the use of the machine, what you paid for the machine. That's the point that a lot of people balk at and it is complicated. But I think we can basically bracket the full plausibility of that point and focus on what

Marx regards as certainly the primary reality. And he also does think is the defining reality. And that is that what you do at work can yield products that are more valuable than your wage. It's really that simple. So if you're paid $50 for a day's labor and you produce something that's worth and sells for $100, well, you have been paid half the value of your product. And so the capitalist has invested $50 for your labor.

And let's suppose this is labor that doesn't require means of production. There are some people who are just hired to perform a service, for example, and you're paid $50 and the result of your labor is $100 accruing to the capitalist. So that is $50 of profit on a $50 investment. So $50 spent, $100 returned, that's $50 profit, it's actually 100% profit. So this is what Marx calls exploitation. And for people who are accustomed to thinking that the word

exploitation implies a stern moral judgment are actually not correct in this instance, because when Marx was writing, the very strong moral overtones of the word exploitation had not yet entered either German or English. It was very common to talk about exploiting mineral resources which simply meant extracting minerals from the ground. And so Marx actually is quite clear to say in many instances that he's not actually censuring the capitalist for what they do. He says that if you're going to function as a manufacturer in our society you have to start with money, you have to hire workers, buy equipment, put them together, produce commodities, sell them, and if you're lucky enough to profit then you can do the same thing on a grander scale

the next time. But if you don't do those things you won't stay in business. So the only people who stay in business will the people who do those things. Marx says that capitalists are in a certain sense, as much prisoners of the system as anybody. They have to hew to the profit motive. They have to keep up with their competitors or they will go under. And at one point he says, every capitalist kills 10.

So most people who enter the fray to compete for profits ends up being defeated. They end up having to go back into the workforce as well. So the whole point is to profit. And Marx argues, and I think very plausibly, that at the very least, the decisive majority, and he thinks all of the profit comes from paying workers less than the value of what they produce. Okay, so that is how profit is generated. It's the result of exploitation, not overcharging in the marketplace, not the value increased by adding technology or whatever into the process, but it's sort of squeezed out of us, the workers during the process of production. And this is how capital accumulates. And this is the whole driving motor, essentially

of capitalism, our labor, specifically, the surplus labor, and the surplus value we create through our surplus labor. And so Marx breaks this up in an interesting way, I think, where he talks about how the workday is basically split up and that you're working for, let's say, eight hours a day, but you're only getting paid for half of that. So you're getting paid for four hours of that day. The rest, the other four hours, you're not getting paid for the value that you create. And this is what Marx refers to as necessary labor versus surplus labor.

And so I'm just going to quote from Marx's Capital Illustrated. You write, the fact is that workers are capable of producing commodities more valuable than labor power itself. Take any worker at random. If $50 is the cost of supplying the worker with the means of subsistence, a capitalist is foolhardy to pay this unless the worker's product, say bread, turns out to be worth more than $50. Otherwise, the capitalist will go out of business. If the worker does produce commodities worth more than the initial investment, all is well.

The investment works. Money is made. If it happens that the worker produces commodities equal in value to the worker's labour power in just part of a workday, say in four hours, there is nothing to prevent the capitalist from employing the worker for more than four hours, say eight hours. When this does in fact happen, as it regularly does, surplus value is the result. The four hours necessary to produce commodities as valuable as the worker's labor power we call, surprise, necessary labor. The extra time spent producing commodities we call surplus labor.

Assuming that the worker spends roughly the average labor time socially required to produce whatever is produced, this labor counts as so much abstract, socially equal labor value. The surplus accumulated is surplus abstract labor surplus value." End quote. Okay, so I'm wondering if you could maybe elaborate on that a little bit more for us using this workday example. So what he's basically saying is that in that eight hour day, to use my example, it's a $100 day.

The index we're using to measure the value of your day is the value of the products you produce in that day. So what you have produced is worth $100 on the market and since you are paying $50 that means that in value terms you are paid for the first four hours of your labor in the sense that by the time you've worked assuming a constant rate of labor and so on by the time you've worked, assuming a constant rate of labor and so on, by the time you've worked half of the day, you have already created products worth, commodities worth the equivalent of your wage. You've already basically produced enough for the capitalist, at least not to lose any money. So what if, for example, there was a fire in the factory?

So you've worked four hours and then all of a sudden there's an emergency and everybody has to leave for the factory. So you've worked four hours and then all of a sudden there's an emergency and everybody has to leave for the day. Well, the capitalist won't have lost any money and you will have been paid for the four hours you worked. But when there is no emergency and then you work another four hours like Einstein in the Swiss patent office, when you're working those additional four hours, that's the performance of what Marx calls unpaid surplus labor, which is exactly what you just said. But so the other thing too, that's like even more jarring about the whole process is that you're not even getting paid for the part of the value that you create. Like you're not compensated for that at all. It's like you said a couple of responses ago, there are two quantities involved, the value of what you produce at work and the value of what

you're paid. These are two separate and parallel processes that are conflated incorrectly in our consciousness. So I like to think of it as like, you know, there's a process of commodity creation happening, and then there's the purchase of labor power by capitalists in order to make that process function. Like it's like we're machines that are being rented out to produce something and the capitalist has to pay for the machine, right? But it's not like what the capitalist pays for the machine rental is based on the value that the machine creates. based on the value that the machine

creates. That would be absurd. What the capitalist pays for the machine is like its own separate transaction and what the machine costs is based on totally different criteria than what the gadget that it produces costs. So it's deceptive that we're paid an hourly wage and that we're paid after we work because it seems like what we're getting paid for is tethered to the value we produce, but that's not really how it works, right? Right, exactly. So if we wanted to coin a phrase that captures Marx's meaning here, we could talk about the

fetishism of the commodity labor power. And this goes right to the heart of how people view the justice and the fairness of what they do, which is very important to Marx. Again, he's very concerned with how people see and evaluate what happens in capitalist society and their role. So on the one occasion when Marx gave a lecture where he explained his own his own theory, this was actually the meeting of the General Council of the International Workingmen's Association, which despite the name had independent women's sections, it wasn't just working men. Nonetheless, Marx was for eight years a founding member and a member throughout the

history of the International Workingmen's Association from 1864 to 1872 when he was writing Capri, when he revised it the first time. In any event, Marx gave a lecture where he explained at the very end that what workers ordinarily want, and this is entirely reasonable given how class relations appear to people on the surface, what workers ordinarily want is a fair day's wage for a fair day's work, a kind of bargain. I mean, you do the work that your boss expects and you've had a handshake with the boss, the boss has promised to pay you fairly. And so you get a fair day's wage

for a fair day's work. That's the exact slogan that Marx discusses at the end of this essay, which is known as value, price, and profit. Interestingly, the official slogan of the American Federation of Labor, the Congress of Industrial Organizations, the Labor Federation in the United States in the 20th century was a fair day's wage for a fair day's work. Now, it's an entirely legitimate aspiration to get paid a good union wage. Marx was not casting aspersions on that. He was a strong supporter of trade unions. But he says it misconstrues what's really happening, and for exactly the reason that

you're alluding to, Robbie, and that is that people think they're being paid for their labor. And so they work the eight hours, they get the wage. They think the wage is paying them for the full eight hours, or in Marx's time, 10 hours. And Marx says that you can regard that as fair if you wish, but it's a mistake to think that you're being paid for your labor. You actually are contracting for the sale of your labor power before any work has been done. What the capitalist is buying is your ability to work. And the capitalist is buying is your ability to work.

And the reason the capitalist wants your ability to work is because it can generate a surplus. And the phrase is surplus value. But again, in our society, that means money, so the so-called M prime. So the capitalist hires workers and pays them a wage that either they agree upon or that the capitalist basically forces upon the worker. But the whole point is for the worker to produce something more valuable than the value of the wage. If

what the worker produced were no more valuable than the value of the wage, the worker wouldn't have a job. The capitals would have no incentive to hire that worker. So Marx felt that for people to lead lives beyond alienation, where they get to use their own creativity in cooperative and self-realizing ways, where they decide what to do and how, what to make and how in dialogue with their friends and coworkers in order to get beyond alienation in that sense and in order to get beyond exploitation

where the surplus accrues to the capitalists who then becomes wealthier and wealthier while everyone else remains stationary if not falling behind. Marx says that it's really important to understand what is really happening here. So a lot of people have overestimated the importance of the capitalist in the process. This is linked to the point I was just making. So a lot of people idolize the founders of archetypal firms, so Ford Motor Company,

Rockefeller and Standard Oil, and Jeff Bezos and Amazon, and Elon Musk and Tesla. There is a tendency to give the capitalist credit, and that's of course not entirely wrong. You know somebody like John Rockefeller is a very clever investor who makes rational decisions whether they're humane or not and shows a competitive spirit that enabled him to thrive when his competitors fell behind. There's no question that the capitalist plays a role but there's a tendency to qualitatively overestimate the capitalist role. Mark says the motor of everything is the work that is done and the idea that workers couldn't themselves organize production, that the people who actually work with their hands, work with their minds, who know how the work is done, the idea that they aren't the motor of what happens, misconstrues

the reality. People have tended to view a lionized capitalist as job creators, as if job creation was the crux of what drives our economy forward. Well, it is part of what drives our economy forward. But what we've been observing in the last generation especially is that people with money are decreasingly likely to be job creators. In fact, people with money are decreasingly likely to be job creators. In fact, people with money are decreasingly likely to be capitalists in the traditional

sense. They collect those mountains of profit and they are in many, many cases diverting that money into the sphere of speculation. So rather than producing commodities currently, a great many of the wealthiest people in the world are investing in securities. They could be producing commodities, but they've deflected their money into the purchase of equities,

all kinds of financial instruments that don't employ people. So there are again, a great, great many people who are not employed. people with money seem to be decreasingly interested in employing people on a large scale, partly because the means of production have become so powerful that it takes relatively small number of people to operate them. And of course, we're now entering an era of robotics and many similar things.

So in any event, Marx wants the people who are immersed in the process, who sell their labor power, who perform labor under the direction of a boss, who yield the surplus to that boss, he wants them to understand as well as possible what is truly happening, and to understand that something else is possible. So you quoted Margaret Thatcher's famous phrase earlier,

there is no alternative. The literary critic, the culture critic Frederick Jameson famously said, people can more easily visualize the end of the world than they can visualize the end of capitalism. Marx's goal was to enable people to understand that what society makes, what society constructs, it can change. Yeah, that's really beautiful. And I really do appreciate that point that you're pulling out here. So I wanted to say a few more words on this idea of the two parallel processes, right, that I talked about earlier, were paid for

the use of our labor power, right? So I wanted to explore the part of it that like, so, okay, so what is labor power worth, right? Like what determines how much capitalists pay for the use of our labor power? So I'm wondering maybe if you could just say a few words to that. When Marx talks about the value of labor power, first of all, as with all values, the value of labor power, the value of any commodity,

the value of labor power is a function of how people treat and regard that product. So for example, independently of how people see the product, of how they treat it in society, there is no such thing as value. There's not a platonic reality somewhere where the product has an inherent value that we're trying to find. In a certain sense, we're always constructing that value. Marx at one point in Capital says, you can look at the product through a magnifying glass. You can twist it and turn it and look at it from every possible angle.

You'll never find the value in it. The reason it has a value is because we give it a value. Outside of human judgment, human action, products don't have prices. So the relevance here then is the degree to which and the way in which labor power comes to have a specific value. And there are some wheels within wheels here. But just to begin with, we all wield different kinds of labor power. So when we were talking earlier about concrete labor, there are many, many different forms of concrete labor. In fact, that's one of the distinguishing features of capitalism. So let's look at farm culture for a moment. Farmers are usually extraordinarily capable people who can

do dozens and dozens of things well. They have maybe a hundred high-level skills. But how many skills are there in farm culture in total? Well, about a hundred. Every farmer has a hundred, the same hundred skills, and that's pretty much what people are able to do. One of the really fascinating and important things about our society is that the working class entering into this rapidly evolving labor process evolves a great many different kinds of skills. Each of us might be relatively specialized, so rather than being like a human Swiss army knife with a hundred skills, maybe each of us has six or seven, two or three of which are saleable skills. So each of us individually might have relatively few skills,

but collectively the working class has millions of skills, many of which didn't even exist historically until this era. This is one of the things that makes me sometimes say that the working class viewed in this light is like the eighth wonder of the world. The working class is capable of millions of things that humanity had never even attempted before. But it's hundreds of millions of people who haven't distributed these skills among themselves. So each of us enters the labor market with some particular skills. And so there are my skills, there are your skills. And to some extent, these are institutionally generic.

So when somebody gets a bachelor's degree in sociology or they get a bachelor's degree in economics, they have reached a sort of institutional benchmark. It's obviously their labor that got them to that point, but the BA in economics means the same thing for them that it means for someone else. Different skills are differently valued, and they are valued differently, valued in most instances in direct proportion to the amount of labor

that goes into the production of that skill. So when I say that students go to college to enhance their labor power so that they can be paid more, the underlying assumption is that if you have a more developed form of skill, which four years of college has helped you acquire, you graduate from college with advanced engineering skills, for example.

The total amount of labor that went into your acquisition of those engineering skills is great. You yourself have put years and years of study into the effort. You have benefited from the years and years of study that your teachers committed to the process. You have benefited from whatever help your parents or other caregivers gave you to enable you to have a clean, well-lit place to do your homework. A great many moments of effort have contributed to making you an engineer.

And so when you arrive on the market, you discover that a lot of people who get simple laboring skills obviously get much lower wages. Why? Because the world is full of people who can do simple laboring skills obviously get much lower wages. Why? Because the world is full of people who can do simple laboring skills, day labor, whereas the number of fully qualified architects or engineers is relatively small and that's because the total amount of time and energy that goes into generating that skill is really considerable. So this partly explains something that's really fundamental too, which is the stratification of the working class. Because when you use the phrase working class, it sounds as if you're talking about a homogeneous group. Oh, we're all wage earners. Well,

we are all wage earners, but we're wage earners who have sold very different kinds of labor power for very different levels of pay. And every one of those differences gives us a potential for internal conflict. People who get paid more can feel distant from people who get paid less and vice versa. But at the same time, it also means that we are a class with a million plus skills, a potential capacity for an enriched solidarity across all those dividing lines at a very

high level. So value labor power is simultaneously something that simply reflects the amount of time and energy that goes into the constitution of anybody's ability to work. But it also constitutes the working class as this constellation, this massive accumulation of different skills, differently valued and differently paid. And there's another really fundamental point here too, and this has to do with the concept of what comprises a fair wage. So when people say, well you need a fair wage in return for a fair day's work, well let's assume that the fair day's work is fairly understood.

Well what's a fair wage? What Marx said and some of his best interpreters have developed is that a fair wage is the wage that enables you to achieve a living standard that people regard as acceptable. Now, that concept of a living standard that people regard as acceptable is, again, a cultural construct. regard as acceptable is again a cultural construct. People who do the exact same kind of concrete labor based on the exact same amount of training in different parts of the world often get paid wildly discrepant wages. And Marx is very mindful of that.

He's not saying that there is an inherent value to labor power. The value of labor power is a function of what is socially average, what is needed on average to reproduce that labor power. The value of labor power is a function of what is socially average, what is needed on average to reproduce that labor power in that particular realm. But the pay that's regarded as fair is a question of how people regard fairness. So if you live in a culture where in order to be fairly paid, you feel that you have to be able to, you know, rent a home with at least one bedroom and own a car so that you can get back and forth to work. That's very different

than perhaps doing the very identical work but living in a context where privately owned cars are rare. People take buses to and from work and it's extraordinarily difficult to find a suburban tract house. Marx is not saying that any of these are inherently better or worse. He does humanly want people to be paid as well as they can be, as long as capitalism thrives. So if there are people who are selling similar labor power and getting much lower pay, Marx would definitely favor pay equity. This actually very directly relates to the theme of equal pay for equal work for women

and for differing ethnicities as well. The question is, what does the culture regard as a spare recompense for somebody's labor power? What is the standard of living that is regarded as an appropriate return for the sale of that labor power. What is the standard of living that is regarded as an appropriate return for the sale of that labor power? And this is something that Marx says at a very key point is again not something that's like written in the stars. This is not something that's engraved in stone or

outside our social practice and our social thought. Mark says these are phenomena which are moral and historical to their core. It's a function of how we think and feel about commodity production in general, about the value of the different kinds of labor power that we acquire and sell. And again, these are things we can think about differently and do differently, even though again, when you're in the bubble, when you're in the moment, it feels as if this is what nature decreed. And Marx says, it isn't so, it's a function of what we do

and how we see the world. Okay, so as we sort of come to the closing chapters of our conversation, there is one more point that I think is really important, which we have not discussed yet. And it is this idea, this concept of the rate of profit and its tendency to fall. So I'm guessing people out there might have come across this idea already, this idea of the tendency of the rate of profit to fall. It's a really important concept, and I think it could

be worthwhile for us to just spend a little bit of time on it as we wrap up our conversation on Capital Volume One. So just as a quick introduction to the idea, because it can get a little complicated, there's some different formulas, and you have this idea of constant versus variable capital, which you need to understand in order to really grasp this idea. So I'm just going to breeze over it a little bit and give you the basics.

Anybody really wants to dive into the details, you can check out the basics. Anybody really wants to dive into details, you can check out the book. But let's just quickly define and distinguish constant and variable capital, and then I'll set the table so we can talk a little bit more about the tendency of the rate of profit to fall and its implications. So variable capital is simple. It's just money spent for labor power. And constant capital is money spent for means of production, for technology, whatever it is. So you and me, we're variable capital, or V. And like the bolts and screws, which

is an image that you use in your book, used in the production process, that's constant capital, or C. So it's through our labor that profits are generated. This is very important. So not through the investment in technology by the capitalist. Surplus, profits, S comes from V, variable capital, not from C, constant capital. Okay. So I'm going to quote here from your book a few passages and then we can jump into it. So, quote, the golden rule of competitive profit making

is to produce more for less, to cut costs by cutting the average labor time required for production. How? By increasing the power of the means of production. It's a simple rule, but one with earth-shaking consequences. Productivity, revolutionized, rises steeply.

The world fills with commodities, and the danger of economic crisis approaches. What's the connection? Just this, that S derives from V. Variable capital, not constant capital, produces surplus value. If competition forces capital to employ an ever higher ratio of constant to variable capital, as it clearly does, then the rate of profit tends to fall. To make the gamble of investment worthwhile requires a certain minimum prospect of gain.

If the rate of profit falls too low, investment ceases to be a wise use of money. The risk of loss is too great. The potential for gain is too slight. Okay, so that's how Marx explains the tendency of the rate of profit to fall. And of course, this has all sorts of implications in terms of capitalism's sustainability and the different ways that capitalists try to evade this reality, staring them in the face. So as we wrap up, I'm wondering if you could just elaborate

a little bit on this idea of the rate of profit and its tendency to fall, and maybe elaborate a little bit on this idea of the rate of profit and its tendency to fall and maybe talk a little bit about its implications as we move into the latter three quarters of the 21st century. Yeah, absolutely. So Marx thinks about this issue in ways that contrast strikingly with the way mainstream economics thinks. Most economists work with at least the tacit assumption that over time the economy is getting better and providing better for humanity and they basically posit growth.

Now obviously economists are well aware that there are moments of uptick and downturn, booms and busts. But I think the general assumption is that over time, the booms outweigh the busts, that growth is more the central phenomenon, that we're not going to backslide. I sometimes characterize this as the opposite of Newtonian theory of gravity. The assumption seems to be that what goes down will rise again. And Marx sees the matter very differently. Most economists are thinking about cycles and they refer to them as business cycles. Marx is well aware of the phenomena that they characterize as business cycles, but he's thinking in historical terms. And historical time is not the same thing as cyclical time.

So the root of his theory about the origin of surplus value is that it comes from the exploited labor of the workers. That means that hiring workers and exploiting them is central to the accumulation of capital. But Marx attributes a great deal of significance to the competition of capital. But Marx attributes a great deal of significance to the competition between capitalists. And that competition forces them to invest

an ever higher ratio of their money in means of production, advanced technology, more powerful machinery, in order to stay abreast of their competitors and basically outproduce them and undersell them. What that means over time is that the percentage of the money invested in production is increasingly money invested in machinery and equipment,

decreasingly as a ratio in workers. Now, of course, the absolute number of workers can go up, but Marx is saying that the total investment in means of production is going up faster. What that means is that for every dollar invested, if Marx's theory is right, for every dollar invested over time, the profit that results from that dollar falls. Now Marx makes a very basic distinction between the mass of profit and the rate of profit. Accumulation of capital has been working its magic for a long time. A lot of capitalists have

accumulated a lot of money. And in fact, Thomas Piketty became very famous 10 years ago for writing a book in which he basically said there are towering masses of money everywhere in the world as a result of these historic processes. His inference is that capitalism is succeeding because it's generating vast quantities of money. I read the Wall Street Journal regularly and the standard phrase that the journal uses is that the world is awash in money. Right this very moment, for example, Warren Buffett's conglomerate Berkshire Hathaway has been the subject of press coverage because they have $320 billion in cash that they haven't figured out what to do with. They don't know if they should buy a company or buy securities. They can't figure out what the best way is to make more money

than they already have. So literally $320 million are essentially sitting in a bank account waiting for some decision to invest. Marx says that this is another aspect of the sort of the kind of fetishism of the system. It appears that the system is prolifically productive, powerful on a hitherto unimagined scale. And technically that's true. Technically the means of production are capable of wonders. Again, as I said earlier,

the entire world could be properly fed and clothed and housed. That would not be technically difficult given the powers of production. But we live in a world where production is for profit. And so if production is for profit and if the profit on every unit of investment, every dollar declines over time, the incentive to invest in production shifts and declines. So take this simple thought experiment. If you are a capitalist and you are investing $100 in producing widgets, some commodity, you

invest $100 and for every $100 invested you get back $5 on average in year one. Fast forward 10 years, you invest $100 and you get back $3. Fast forward 20 years, you invest the same $100 and you're now getting back only a dollar. And that's because the ratio of your investment that contributes to profit is a declining portion of your total investment. So at a certain point the rate of profit will be falling to a quarter, a dime, five cents. And then at that point, it becomes entirely rational for the moneyowner who has just acquired this towering mass of money to say, well, wait a second, if I'm only going to be getting

back pennies on the dollar for my investment, and there could be a disruption in the market, there could be a change in people's tastes, and I'm just spending money that I will not get returned at all. The products will be shipped to stores and go unsold. At that point, it's very rational for capitalists to look into other options. And so I would argue that in a certain sense, at this point, they have the choice of remaining capitalists, which means that they spend their money to hire workers and produce commodities, or they could use their money to speculate. And the question of whether or not there is a falling rate of profit globally is basically unanswerable. It would be really nice to have

the data to be able to say one way or the other. And I was agnostic about that question for a very long time. Why is it impossible to say? Well, only a couple of the economies of the world have the right kind of documentation that enable us to conclude if the profit rate is falling, rising, or staying the same. The United States is one of them. And the outstanding economist Andrew Kleiman has written what I regard as a very convincing explanation of the degree to which the rate of profit actually has fallen in the United States. But is that true in China? Is that

true in Japan? Is that true in Germany? Only in a few cases do we have enough data to say for sure? So, Marx said that there will be a very great mass of money, but he believed that the falling rate of profit would outweigh other tendencies over time, and so that people with money would be increasingly incentivized to spend their money for securities rather than producing commodities. Now empirically speaking there has been a huge shift of exactly that kind. The important international management consulting firm McKinsey and Company did a study where they analyzed the rate of industrial investment, the percentage of money that went into production versus speculation in 1975, and they compared

that to the rates 30 years later. This is still, this is now 20 years ago, but it's still a good example. They said that if the rate of investment in production had remained constant, and just in the United States from 1975 to 2005, that an additional $ trillion dollars would have been invested in production. That would have created a lot of jobs. It would have created a lot of demand for workers and that would have with almost certainty it would have increased wages as a result. So more people would have had jobs and wages would have gone up. But 20 trillion dollars that existed, rather than being invested in production, was invested in speculation.

And the consequences of that are huge. The number of people who can hope to have jobs in the future is called into question by that development. And let me just make a reference to the topic that has been on everyone's lips recently, which is artificial intelligence. Artificial intelligence is actually a phenomenon very similar to the power limb. So for example, my line of work I sometimes call the talking trait because I teach and I'm called upon to go to work and explain the various things that I've studied and hope to communicate effectively about that.

And a lot of what I do is writing with a similar intent. I've spent many years acquiring, developing my writing skills and my research skills. It's very clear that artificial intelligence will not have exactly my abilities, but the AI that I have experimented with, chat GPT and the other famous ones, the ability to quickly research something, to write something coherent and perfectly composed English, and actually I can say in German and other languages as well,

is very impressive. So if you think about it for a second, back to the whole issue of the value of labor power. So on the one hand, capital is fleeing the realm of production altogether, that's reducing the demand for labor power, reducing the number of total jobs that are being created. And of course that has big consequences. But at the same time, artificial intelligence is an investment just like investing in a power loop or in any form of advanced technology. And prior forms of automation have mostly displaced manual labor.

So robots on auto assembly lines do manual tasks that workers formerly did. Those workers don't have those jobs any longer. The longshore industry used to be a big source of employment for people living in port cities, but now containerized freight and crane technology has eliminated the need for physical labor by longshore workers, and great many auto workers are being, and other workers are being replaced by robots. So most of the prior phase of automation has basically devalued the labor power that used to do that work. The demand for that labor power has fallen. The average amount of effort that is required to do that work diminishes.

You just produce a whole raft of robots and you don't have to educate people for 15 years in an apprenticeship program and then probationary status in their early careers. And that's even more visibly plain with respect to people who are in the white collar world, particularly the office world, where what we do is write and count and talk. We may have spent decades acquiring accounting skills, but if it hasn't already happened, it will soon happen, that artificial intelligence will catch up with and eclipse the accounting skills of most living humans. And so the value of their labor power will suddenly tumble. So you have all of these things happening at once.

Continuing investment in the highest forms of technology, which displaces workers, renders their skills obsolete and out of demand, often forces them to the margins of the market. And then at the same time, you have this corresponding inflow of money into the realm of speculative investment. And that speculative investment can turn into smoke in a moment. 15 years ago, in the 2008 financial crisis, there was a financial instrument called

derivatives that had just been developed in the preceding decade along with collateralized debt obligations and other elaborate financial instruments. On the eve of the Great Recession of 2008, those derivatives which are just baskets of debt and all kinds of other financial paper products, they were estimated at many trillions of dollars of value. When the recession happened, forty trillion dollars, that was supposedly the value of these instruments, evaporated, just evaporated. Nothing is worth anything if nobody's willing to buy it. So supposedly the day before the recession, people would have been willing to buy it. So supposedly the day before the recession people would have been

willing to spend trillions of dollars to get their hands on these bundles and baskets of derivatives but when the consequences of the recession were felt and understood there was no demand any longer. So supposedly 40 trillion dollars of value disappeared overnight and every time the stock market tumbles They might say that like the world's leading chip maker right now in video There was a moment when a Chinese competing product was introduced about two weeks ago and they said oh in video just lost $17 billion of market value Well, what does that mean?

Well, it it tells you that not only is money fleeing into the the sphere of speculation But the sphere of speculation is very much a gambler's den. So none of this bodes well for the future of a robust, intact capitalism. Marx could be wrong, obviously. He was very careful when he discussed the falling tendency of the rate of profit to discuss a half dozen counter tendencies. Marx was not trying to predict something mechanical and inevitable. When he evaluated the tendencies that cause the rate of profit to go up or hold constant and the tendencies that are likely to lead it to decline, he felt that the latter, that the

declining tendencies were likely to be the ultimate center of gravity for the economy as it progresses over time. But what that implies then is that Marx's founding concern with how people see and feel about their involvement in the capitalist system is then very fundamental. Do you think you're being paid for your labor or do you agree with Marx that you're selling your labor power? Do you believe that labor can only be exercised under the direction of a boss?

Do you believe that society could exist without bosses? Do you believe that society could exist without capital? And that would mean that rather than people being hired to work, they would simply cooperate to produce what they need and to discuss how to go about doing that. Again, it's extraordinarily difficult to think your way beyond the current horizon of possibility. But Marx said that if capitalism is on a bumpy path of the kind that he describes where system

crisis on a very grave scale could ensue, then everything hinges on how we respond. If we enter a really vast depression, if we come to the brink of out and out climate collapse, everything hinges on how we respond. So we, you and I, Robbie, we and the listeners, we are central to this story. We work for wages, we get schooling in the hope of getting jobs, we risk being displaced by advanced technology, losing our jobs, facing all the consequences. And we do that as individuals, we do that with our friends and families, and the entire economy is hanging in the balance in that sense. So Marx wants people to face the reality as clearly as they can, and how that could happen, what it means in a bigger

and broader sense is extraordinarily difficult to even think about, let alone resolve that present. And Marx, you know, Marx was only 64 years old when he died. His famous late photo where he looked like Father Time with his, you know, cloud of white hair around his head, he was only 64 years old. And if he had lived just as long as Engels, he could have written a couple more volumes of capital. He would have lived another 11 or 12 years, and we might have even better insight than he already bequeathed us. You've been listening to an Upstream Conversation with David Smith, Professor of Sociology at the University of Kansas and author of the book, Marx's Capital Illustrated, with illustrations

by Phil Evans. Please check the show notes for links to any of the resources mentioned in this episode. Thank you to Mount Eerie for the intermission music and to Phil Evans for the cover art. Upstream theme music was composed by Robert. Upstream is almost entirely listener funded. We couldn't keep this project going without your support. There are a number of ways that you can support us financially. You can sign up to be a Patreon subscriber, which will give you access to bi-weekly episodes ranging from conversations to readings and more. Signing up for Patreon is a great way to make Upstream a weekly show, and it will also give you access to our entire back catalogue of Patreon episodes, along with stickers and

bumper stickers at certain subscription tiers. Sign up and find out more at patreon.com forward slash upstream podcast. And if Patreon's not really your thing, you can also make a tax deductible, recurring or one-time donation on our website upstreampodcast.org forward slash support. Through this support, you'll be helping us keep upstream sustainable and helping to keep this whole project going. Post capitalist political education podcasts are not easy to fund. So thank you in advance for the crucial support. And for more from us, visit UpstreamPodcast.org and follow us on Instagram, Blue Sky, Threads, and Facebook for updates and post-capitalist memes

at Upstream Podcast. You can also subscribe to us on Spotify, Apple Podcasts, or wherever you listen to your favorite podcasts. And if you like what you hear, please give us a 5-star rating and review. This really helps get Upstream in front of more eyes and into more ears. Thank you. You