Labour power in the context of "Adam Smith"

Marxism is a political philosophy and method of socioeconomic analysis that uses a dialectical materialist interpretation of historical development, known as historical materialism, to understand class relations and social conflict. Originating in the works of 19th-century German philosophers Karl Marx and Friedrich Engels, the Marxist approach views class struggle as the central driving force of historical change.

Marxist analysis views a society's economic mode of production as the foundation of its social, political, and intellectual life, a concept known as the base and superstructure model. In its critique of capitalism, Marxism posits that the ruling class (the bourgeoisie), who own the means of production, systematically exploit the working class (the proletariat), who must sell their labour power to survive. This relationship, according to Marx, leads to alienation, periodic economic crises, and escalating class conflict. Marx theorised that these internal contradictions would fuel a proletarian revolution, leading to the overthrow of capitalism and the establishment of a socialist mode of production. For Marxists, this transition represents a necessary step towards a classless, stateless communist society.

In economics, a market is a composition of systems, institutions, procedures, social relations or infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services (including labour power) to buyers in exchange for money. It can be said that a market is the process by which the value of goods and services are established. Markets facilitate trade and enable the distribution and allocation of resources in a society. Markets allow any tradeable item to be evaluated and priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights (cf. ownership) of services and goods. Markets generally supplant gift economies and are often held in place through rules and customs, such as a booth fee, competitive pricing, and source of goods for sale (local produce or stock registration).

Markets can differ by products (goods, services) or factors (labour and capital) sold, product differentiation, place in which exchanges are carried, buyers targeted, duration, selling process, government regulation, taxes, subsidies, minimum wages, price ceilings, legality of exchange, liquidity, intensity of speculation, size, concentration, exchange asymmetry, relative prices, volatility and geographic extension. The geographic boundaries of a market may vary considerably, for example the food market in a single building, the real estate market in a local city, the consumer market in an entire country, or the economy of an international trade bloc where the same rules apply throughout. Markets can also be worldwide, see for example the global diamond trade. National economies can also be classified as developed markets or developing markets.

Capital: A Critique of Political Economy (German: Das Kapital. Kritik der politischen Ökonomie), also known as Das Kapital (German: [das kapiˈtaːl]), is a foundational theoretical text in Marxist philosophy, economics, and politics by Karl Marx. His magnum opus, the work is a critical analysis of political economy, meant to reveal the economic patterns underpinning the capitalist mode of production. Das Kapital is in three volumes, of which only the first was published in Marx's lifetime (1867); the others were completed from his notes and published by his collaborator Friedrich Engels in 1885 and 1894.

The central argument of Das Kapital is that the motivating force of capitalism is in the exploitation of labour, whose unpaid work is the ultimate source of surplus value and profit. Beginning with an analysis of the commodity, Marx argues that the capitalist mode of production is a historically specific system where social relations are mediated by commodity exchange. He posits a labour theory of value, contending that the economic value of a commodity is determined by the socially necessary labour time required for its production. Under this system, the worker's capacity to labour (their labour power) is sold as a commodity, but its use-value—the ability to create new value—is greater than its exchange-value (the wage), allowing the capitalist to extract surplus value. This process drives capital accumulation, which in turn fosters technological change, the creation of a reserve army of labour, and a long-term tendency of the rate of profit to fall, leading to economic crises and intensifying class conflict.

In the Marxist theory of historical materialism, a mode of production (German: Produktionsweise, "the way of producing") is a specific combination of the:

• Productive forces: these include human labour power and means of production (tools, machinery, factory buildings, infrastructure, technical knowledge, raw materials, plants, animals, exploitable land).
• Social and technical relations of production: these include the property, power and control relations (legal code) governing the means of production of society, cooperative work associations, relations between people and the objects of their work, and the relations among the social classes.

Marx said that a person's productive ability and participation in social relations are two essential characteristics of social reproduction, and that the particular modality of those social relations in the capitalist mode of production is inherently in conflict with the progressive development of the productive capabilities of human beings. A precursor concept was Adam Smith's mode of subsistence, which delineated a progression of types of society based upon how the citizens of a society provided for their material needs.

The proletariat (/ˌproʊlɪˈtɛəriət/; from Latin proletarius 'producing offspring') is the social class of wage-earners, those members of a society whose possession of significant economic value is their labour power (their capacity to work). A member of such a class is a proletarian or a proletaire. Marxist philosophy regards the proletariat under conditions of capitalism as an exploited class,⁠ deprived of their own means of production and thereby forced to operate industrial means of production held as private property by the bourgeoisie, receiving wages which represent less than the value their labour produced, the remainder appropriated by the bourgeoisie as profits.

Karl Marx argued that the conflicting inherent interests between the proletariat and the bourgeoisie gives the proletariat common economic and political interests that transcend national boundaries, impelling them to unite and assert their sovereignty over the capitalist class, and eventually to create a socialist society free from class distinctions.

Wage labour (also wage labor in American English), usually referred to as paid work, paid employment, or paid labour, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their labour power under a formal or informal employment contract. These transactions usually occur in a labour market where wages or salaries are market-determined.

In exchange for the money paid as wages (usual for short-term work-contracts) or salaries (in permanent employment contracts), the work product generally becomes the undifferentiated property of the employer. A wage labourer is a person whose primary means of income is from the selling of their labour in this way.

In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to manufacture it: i.e. the amount raised through sale of the product minus the cost of the materials, plant and labour power. The concept originated in Ricardian socialism, with the term "surplus value" itself being coined by William Thompson in 1824; however, it was not consistently distinguished from the related concepts of surplus labor and surplus product. The concept was subsequently developed and popularized by Karl Marx. Marx's formulation is the standard sense and the primary basis for further developments, though how much of Marx's concept is original and distinct from the Ricardian concept is disputed (see § Origin). Marx's term is the German word "Mehrwert", which simply means value added (sales revenue minus the cost of materials used up), and is cognate to English "more worth".

It is a major concept in Karl Marx's critique of political economy, and, like all of Marx's economic theories, lies outside the economic mainstream. Conventionally, value-added is equal to the sum of gross wage income and gross profit income. However, Marx uses the term Mehrwert to describe the yield, profit or return on production capital invested, i.e. the amount of the increase in the value of capital. Hence, Marx's use of Mehrwert has always been translated as "surplus value", distinguishing it from "value-added". According to Marx's theory, surplus value is equal to the new value created by workers in excess of their own labor-cost, which is appropriated by the capitalist as profit when products are sold. Marx thought that the gigantic increase in wealth and population from the 19th century onwards was mainly due to the competitive striving to obtain maximum surplus-value from the employment of labor, resulting in an equally gigantic increase of productivity and capital resources. To the extent that increasingly the economic surplus is convertible into money and expressed in money, the amassment of wealth is possible on a larger and larger scale (see capital accumulation and surplus product). The concept is closely connected to producer surplus.