As explained by V.I. Lenin.
A. "It is the ultimate aim of this work to lay bare the economic law of motion of modern society, i.e., capitalist, bourgeois society," says Marx in the preface to Capital. An investigation into the relations of production in a given, historically defined society, in their inception, development, and decline -- such is the content of Marx's economic doctrine. In capitalist society, the production of commodities is predominant, and Marx's analysis therefore begin with an analysis of commodity.
As explained by V.I. Lenin.
A. A commodity is, in the first place, a thing that satisfies a human want; in the second place, it is a thing that can be exchanged for another thing. The utility of a thing makes is a use-value. Exchange-value (or, simply, value), is first of all the ratio, the proportion, in which a certain number of use-values of one kind can be exchanged for a certain number of use-values of another kind. Daily experience shows us that million upon millions of such exchanges are constantly equating with one another every kind of use-value, even the most diverse and incomparable. Now, what is there in common between these various things. things constantly equated with one another in a definite system of social relations? Their common feature is that they are products of labor. In exchanging products, people equate the most diverse kinds of labor. The production of commodities is a system of social relations in which individual producers create diverse products (the social division of labor), and in which all these products are equated with one another in the process of exchange. Consequently, what is common to all commodities is not the concrete labor of a definite branch of production, not labor of one particular kind, but abstract human labor -- human labor in general. All the labor power of a given society, as represented in the sum total of the values of all commodities, is one and the same human labor power. Thousands upon thousands of millions of acts of exchange prove this. Consequently, each particular commodity represents only a certain share of the socially necessary labor time. The magnitude of value is determined by the amount of socially necessary labor, or by the labor time that is socially necessary for the production of a given commodity, of a given use-value.
"Whenever, by an exchange, we equate as values our different products, by that very act, we also equate, as human labor, the different kind of labor expended upon them. We are not aware of this, nevertheless we do it." [Capital]. As one of the earlier economists said, value is a relation between two persons; only he should have added: a relation concealed beneath a material wrapping. We can understand what value is only when we consider it from the standpoint of the system of social relations of production in a particular historical type of society, moreover, or relations that manifest themselves in the mass phenomenon of exchange, a phenomenon which repeats itself thousands upon thousands of time. "As values, all commodities are only definite masses of congealed labor time." [A Contribution to the Critique of Political Economy].
After making a detailed analysis of the twofold character of the labor incorporated in commodities, Marx goes on to analyze the form of value and money. Here, Marx's main task is to study the origin of the money form of value, to study the historical process of the development of exchange, beginning with individual and incidental acts of exchange (the "elementary or accidental form of value", in which a given quantity of one commmodity is exchanged for a given quantity of another), passing on to the universal form of value, in which a number of different commodities are exchanged for one and the same particular commodity, and ending with the money form of value, when gold becomes that particular commodity, the universal equivalent. As the highest product of the development of exchange and commodity production, money masks, conceals, the social character of all individual labor, the social link between individual producers united by the market. Marx analyzes the various functions of money in very great detail; it is important to note here in particular (as in the opening chapters of Capital in general) that what seems to be an abstract and at times purely deductive mode of exposition deals in reality with a gigantic collection of factual material on the history of the development of exchange and commodity production.
"If we consider money, its existence implies a definite stage in the exchange of commodities. The particular functions of money, which it performs either as the mere equivalent of commodities or as means of circulation, or means of payment, as hoard or as universal money, point, according to the extent and relative preponderance of the one function or the other, to very different stages in the process of social production." [Capital].
As explained by V.I. Lenin.
A. At a certain stage in the development of commodity production money becomes transformed into capital. The formula of commodity circulation was C-M-C (commodity -- money -- commodity) -- i.e., the sale of one commodity for the purpose of buying another.
The general formula of capital, on the contrary, is M-C-M -- i.e., the purchase for the purpose of selling (at a profit).
The increase over the original value of the money that is put into circulation is called by Marx surplus value. The fact of this "growth" of money in capitalist circulation is common knowledge. Indeed, it is this "growth" which transforms money into capital, as a special and historically determined social relation of production. Surplus value cannot arise out of commodity circulation, for the latter knows only the exchange of equivalents; neither can it arise out of price increases, for the mutual losses and gains of buyers and sellers would equalize one another, whereas what we have here in not an individual phenomenon but a mass, average and social phenomenon. To obtain surplus value, the owner of money "must ... find... in the market a commodity, whose use-value possesses the peculiar property of being a source of value" [Capital]. -- a commodity whose process of consumption is at the same time a process of the creation of value. Such a commodity exists -- human labor power. Its consumption is labor, and labor creates value. The owner of money buys labor power at its value, which, like the value of every other commodity, is determined by the socially necessary labor time requisite for its production (i.e., the cost of maintaining the worker and his family). Having bought enough labor power, the owner of money is entitled to use it, that is, to set it to work for a whole day -- 12 hours, let us say. Yet, in the course of six hours ("necessary" labor time) the worker creates product sufficient to cover the cost of his own maintenance; in the course of the next six hours ("surplus" labor time), he creates "surplus" product, or surplus value, for which the capitalist does not pay. Therefore, from the standpoint of the process of production, two parts must be distinguished in capital: constant capital, which is expended on means of production (machinery, tools, raw materials, etc.), whose value, without any change, is transferred (immediately or part by part) to the finished product; secondly, variable capital, which is expended on labor power. The value of this latter capital is not invariable, but grows in the labor process, creating surplus value. Therefore, to express the degree of capital's exploitation of labor power, surplus must be compared not with the entire capital but only with variable capital. Thus, in the example just given, the rate of surplus value, as Marx calls this ration, will be 6:6, i.e., 100 per cent.
There were two historical prerequisites for capital to arise: first, the accumulation of certain sums of money in the hands of individuals under conditions of a relatively high level of development of community production in general; secondly, the existence of a worker who is "free" in a double sense: free of all constraint or restriction on the scale of his labor power, and free from the land and all means of production in general, a free and unattached laborer, a "proletarian", who cannot subsist except by selling his labor power.
There are two main ways of increasing surplus value: lengthening the working day ("absolute surplus value"), and reducing the necessary working day ("relative surplus value"). In analyzing the former, Marx gives a most impressive picture of the struggle of the working class for a shorter working day and of interference by the state authority to lengthen the working day (from the 14th century to the 17th) and to reduce it (factory legislation in the 19th century). Since the appearance of Capital, the history of the working class movement in all civilized countries of the world has provided a wealth of new facts amplifying this picture.
Analyzing the production of relative surplus value, Marx investigates the three fundamental historical stage in capitalism's increase of the productivity of labor: (1) simple co-operation; (2) the division of labor, and manufacture; (3) machinery and large-scale industry. How profoundly Marx has here revealed the basic and typical features of capitalist development is shown incidentally by the fact that investigations into the handicraft industries in Russia furnish abundant material illustrating the first two of the mentioned stages. The revolutionizing effect of large-scale machine industry, as described by Marx in 1867, has revealed itself in a number of "new" countries (Russia, Japan, etc.), in the course of the half-century that has since elapsed.
To continue. New and important in the highest degree is Marx's analysis of the accumulation of capital -- i.e., the transformation of a part of surplus value into capital, and its use, not for satisfying the personal needs of whims of the capitalist, but for new production. Marx revealed the error made by all earlier classical political economists (beginning with Adam Smith), who assumed that the entire surplus value which is transformed into capital goes to form variable capital. in actual fact, it is divided into means of production and variable capital. Of tremendous importance to the process of development of capitalism and its transformation into socialism is the more rapid growth of the constant capital share (of the total capital) as compared with the variable capital share.
By speeding up the supplanting of workers by machinery and by creating wealth at one extreme and poverty at the other, the accumulation of capital also gives rise to what is called the "reserve army of labor", to the "relative surplus" of workers, or "capitalist overpopulation", which assumes the most diverse forms and enables capital to expand production extremely rapidly. In conjunction with credit facilities and the accumulation of capital in the form of means of production, this incidentally is the key to an understanding of the crises of overproduction which occur periodically in capitalist countries -- at first at an average of every 10 years, and later at more lengthy and less definite intervals. From the accumulation go capital under capitalism we should distinguish what is known as primitive accumulation: the forcible divorcement of the worker from the means of production, the driving of the peasant off the land, the stealing of communal lands, the system of colonies and national debts, protective tariffs, and the like. "Primitive accumulation" creates the "free" proletarian at one extreme, and the owner of money, the capitalist, at the other.
A. According to the materialist conception of history the determining element in history is ultimately the production and reproduction in real life. More than this neither Marx nor I have ever asserted. If therefore somebody twists this into the staternent that the economic element is the only determining one, he transforms it into a meaningless, abstract and absurd phrase. The economic situation is the basis, but the various elements of the superstructure—political forms of the class struggle and its consequences, constitutions established by the victorious class after a successful battle, etc.—forms of law—and then even the reflexes of all these actual struggles in the brains of the combatants: political, legal, philosophical theories, religious ideas and their further development into systems of dogma—also exercise their influence upon the course of the historical struggles and in many cases preponderate in determining their form. There is an interaction of all these elements, in which, amid all endless host of accidents (i.e., of things and events whose inner connection is so remote or so impossible to prove that we regard it as absent and can neglect it), the economic movement finally asserts itself as necessary. Otherwise the application of the theory to any period of history one chose would be easier than the solution of a simple equation of the first degree.
We make our own history, but in the first place under very definite presuppositions and conditions. Among these the economic ones are finally decisive. But the political, etc., ones and indeed even the traditions which haunt human minds, also play a part, although not the decisive one. (Engels, Letter to Joseph Bloch - 1890)