 In the previous three segments, we have understood in the first segment the notion of a commodity, in the second segment the idea of money. With that, we came to a study of capitalism and understood the notion of surplus value and summarized everything in the notion of the circuit of capital. That has given us a pretty good understanding of some of the key structural features of capitalism. In this segment, we would like to understand what is the impact of capitalist relations of production on the organization of production and on the two key inputs into production or into the two basic sources of wealth, labor and nature. Let us start with understanding the changes in the organization of production. So, the key motivation for capitalism is to generate more surplus value. There are two different ways in which surplus value can be increased. One is known as absolute surplus value and another is known as relative surplus value. Let us understand these three two concepts using that diagram of the box that we saw earlier. Let me remind you the box, the width of the box represents the total amount of labor that is involved in production. You can think of it as the total length of the working day. The total working day in turn is divided into two parts by the value of labor power. So, this length is the value of labor power. Remember, value of labor power refers to the amount of social labor time that is returned to the working class in terms of the wage. And the length of the box represents the total value that is added by the working class in the process of production. So, they get back only a fraction of what they add and the remaining is what is surplus value. So, this length is the surplus value and the capitalist system wants to constantly increase the surplus value. As I said, there are two different ways of doing that. The first which is absolute surplus value is increasing surplus value by increasing the length of the working day. So, if the value of labor power is fixed and the length of the working day is increased, then the width of the box increases. Since the value of labor power is fixed, whatever the increase in the width of the box goes into the component of surplus value. So, this is one way in which the capitalist system can increase surplus value. This is what is known by is called by Marx as absolute surplus value. So, absolute surplus value is the increase in surplus value by increasing the length of the working day keeping the value of labor power fixed. The notion of absolute surplus value helps us in understanding key features of capitalist history. Why? The amount of surplus value that is increased by increasing the working day can be used to understand the historical struggles between workers and capitalist and the state over the length of the working day. In the initial phases of capitalism, there was lot of excess labor, lot of people looking for work and relatively less amount of work. That is why the value of labor power remained relatively constant. At that point in time, also the technology used for production was not very high and therefore the productivity of labor was also low. So, the value of labor power was fixed because of relatively excess supply of labor and the productivity of labor was low because the technology of production had not become as advanced as we see today. In that case, the capitalist system could increase surplus value only by increasing the length of the working day. And therefore, if we look at accounts of the Industrial Revolution in England in the 17th and 18th century, we see that the length of the working day is pushed to 8, 10, 12, 14, 16 hours. So, that was how the system generated surplus value. Of course, the working class once it got on its feet started struggling and it is because of the historical struggles of the working day of the working class over the length of the working day, which can be understood by the notion of surplus value that throws light on the history of struggles over the working day. Which is because of that struggle that today we have a working day of 8 hours. So, that is one way in which the system can increase surplus value. That helps us in understanding one of the key features of capitalist history which is the struggle over the length of the working day in England in the 17th and 18th century. Let us look at the other way in which surplus value can be increased. Let us again draw the box. The length of the box gives us the working day which is the total amount of time that is devoted to production by the workers. It is divided into two parts by the value of labour power. Once the working class became strong, it started pushing back on the ability of the capitalist to increase the working day to longer and longer periods. And it is because of their struggle that the working class the state was forced to finally step in and make the working day of an 8 hour duration. So, from that period on the width of the box was fixed. So, the total working day in a sense was fixed. Once the total working day was fixed, how would the capitalist system increase the surplus value? It was no longer possible to increase the working day. Therefore, the only way in which the capitalist system could increase surplus value was by reducing the value of labour power. Because if the value of labour power fell from here to here, then the amount of surplus value increased from here to here. So, if the width of the box is fixed, but the value of labour power falls, then the amount of time that is available to do surplus labour increases. Because the value of labour power is also an indication of the amount of time that is necessary labour. This way of increasing surplus value is known as relative surplus value. What is the mechanism by which the capitalist system increases relative surplus value? Remember, relative surplus value can increase only when the value of labour power falls. What is the value of labour power? The value of labour power is a representation of the necessary labour of society. Meaning the amount of time that society must devote to producing the bundle of commodities that is needed for reproduction of the workers. The amount of time that is devoted to producing a bundle of commodities that workers consume can be reduced if the productivity of labour increases. So, therefore, the only way in which relative surplus value can be generated is if the technical and organizational ways of production are constantly revolutionized, so as to increase the productivity of labour or the intensity with which workers work. So, as soon as capitalism moves from its initial phases, when because of the persistence of the working class, the length of the working days more or less fixed, there develops a structural necessity in capitalism to constantly increase the productivity of labour. And to constantly increase the productivity of labour, it constantly revolutionizes the methods of production, the technology and the organization of production. So, the notion of relative surplus value allows us to understand one of the key features of capitalism as distinct from previous modes of production like feudalism or a slave society. In capitalism, there is an enormous tendency for technical change, for increasing and improving the technical methods of production, the organization of production, all of which is geared towards increasing the productivity of labour. The notion of relative surplus value immediately allows us to understand that because once capitalism has moved beyond its initial phases, when it could increase the length of the working day, once the resistance of workers have fixed the working day, the only way in which the capitalist system can increase surplus value is by reducing the value of labour power, meaning by reducing the amount of social labour time that is necessary to produce the consumption basket of a typical worker. And the only way to do that is to improve the productivity of labour. So, let me summarize. There are three aspects that go towards giving us the division between value added and surplus value. The length of the working day, the intensity of labour and the productivity of labour. The length of the working day changing so as to increase surplus value is known as absolute surplus value. Either the intensity of labour or the productivity of labour changing to give more surplus value is known as relative surplus value. Absolute surplus value is an important concept to understand the initial phases of capitalist development. It especially throws light on the struggle between capital and labour over the length of the working day. Once capitalism moves beyond its initial phases, the notion of relative surplus value becomes important because it helps us understand the structural feature of technological progressivism that is built into capitalism. With the notion of relative surplus value, we can also understand the changes in the organization of the production process in capitalism. And here Marx talks about a three-phase change. In the initial phases, capitalism just took whatever methods of production it found from feudal times. And here we are really talking about artisanal production and the handicrafts industry. In the initial phases, the ability of capitalism to increase productivity of labour really came not from changing the methods of production but just by bringing together many people under the same roof. So, instead of many artisans working in their own home, the initial phases of capitalism saw a merchant or a capitalist bringing 100 artisans under one roof. And this phase of organizational production is called by Marx as cooperation. So, the increases in productivity of labour comes about here just because when 10 or 100 artisans work under the same roof, there are lots of ways in which costs can be reduced and that leads to an increase in productivity of labour. Again, that is a way in which relative surplus value can be increased. As we move beyond the initial phases, we do see a very significant change which is characterized by Marx as the period of manufacture. The key change from cooperation to manufacture is that now capitalism takes over the methods of production and changes them. So, whereas earlier it was just using whatever methods of production it had found, in this phase the capitalist directly intervenes in the methods of production. And the key idea that emerges here is the notion of division of labour within a capitalist enterprise. Capitalists gradually realize that one way to enormously increase the productivity of labour is to assign worker to specific tasks. So, the whole process of manufacturing a commodity is broken up into small tasks, small pieces and one worker or a group of workers is assigned to each. This is what Adam Smith called the detailed division of labour and there was an enormous increase in labour productivity because now workers could specialize in different tasks. This phase of capitalist production is called by Marx as manufacture. One important feature of manufacture was that some groups of workers who were important or strategically located in the whole process of production of a commodity started gaining more power becoming becoming more powerful. So, that conflict between the workers and the capitalists led to a transition from manufacture to the next phase which Marx calls machine production. In machine production lot of those tasks which had earlier been assigned to individual or groups of workers were now taken over by a machine. Now, this had two important effects it again led to an increase in the productivity of labour because many tasks could be done much more quickly by machines than workers. But more importantly the power of the strategically located groups of workers was diminished because they were replaced by machines. This is the way in which we can understand a whole history of evolution of capitalist production using the notion of relative surplus value. There are two more issues that we want to think about when we think about the effect of capitalist relations on the production process and that is what Marx calls the two original sources of wealth. The two original sources of wealth are of course nature and labour and the process of production is an interaction between nature and labour for the creation of items that are necessary for the reproduction of human beings. But the capitalist way of organizing production has a negative consequences for both nature and for labour. Capitalism is only concerned about value and exchange value. It does not care about the specific use values that are created and therefore it does not care about the impact of the use values that are being created on either nature or on labour. So, in this segment of the course we will read some material which shows how the ecological crisis comes out of an inbind logic in capitalism because of its because capitalism by necessity is indifferent to the use values it creates and therefore it undermines the ability of nature to replenish itself. It undermines what ecological economics call the source and sink function of nature. On the other hand, it is also indifferent to the effect of capitalist production on labour. Capitalist production leads to alienation. So, the workers do not plan the production process, do not own the output of the production process, they are just carrying out tasks that are assigned to them. So, the process of production is hugely alienating. On the other hand, labour gets de-skilled over time. There is an inherent necessity of the capitalist system to simplify tasks, to reduce complex tasks to simple tasks so that it can save on the cost of labour. So, therefore, the capitalist organization of production has these two important impacts on labour. In this segment of the course, we are going to read articles on both these aspects. With that let me summarize and end this discussion on product the effect of capitalist relations on production. So, we saw two important concepts, the concept of absolute surplus value and relative surplus value and used it to understand some key features of capitalist history. Then we moved on to understanding the effect of capitalist relations on the two original sources of wealth, nature and labour. With that, we will end our discussion of production under capitalism. In the next segment, we will discuss accumulation of capital.