 We obviously study Marxist economics and the reason for having this school today is because we see the economic organization of society as fundamental to the way the other society is organised. As I said, there isn't time to go into a detailed study of all the aspects of Marxist economic today on particularly not in this session, so I am going to focus on one particular aspect, the most fundamental aspect, which is the labour theory of value. But to really grasp Marx's ideas about the labour theory of value, we need to understand where his ideas came from, and so I will try to cover, again and necessarily because of time and necessarily superficial way, the main trends in economic thought prior to Marx. I'll focus in particular on those ideas, those pre-Marx ideas which later became central to his theories, the building blocks that he used to come up with his theories, and I will then go on, I will move on to explaining Marx's ideas themselves and how he took those building blocks and turned them into the kind of ideas that we know today, the ones we read in wage labour and capital, value price and profit and capital itself, obviously. Marx in developing his theories stood on the shoulders of great thinkers of the past, he studied them, he criticised them mercilessly, and on that basis uncovered the laws, the basic laws, the most fundamental laws that govern the capitalist mode of production. So to begin then to start off, serious study of political economy really began in the 17th century, the 1600s, and it began in England with a school of thought known as mercantilism. Now as the name suggests that theory basically held that wealth and value was the product of commerce and trade. By buying and selling you created value, you created wealth, buying cheap and selling dear basically. It was the circulation of commodities that the mercantilists thought created value. Now this was obviously the political economy of a rising merchant class at that time, and what you had at that time was an alliance between that nascent bourgeoisie, the rising merchant class and the state, with the form of providing wealth, obviously for themselves but also for the nation state, and the latter, the state itself providing protection in England of course. In the form of the navy protecting merchant ships going around the place to do their trade and creating wealth for everybody. And so mercantilist economic theory basically promoted the idea of state intervention in the economy with the aim of strengthening one particular state or empire against another particular state or empire. The kind of policies that they advocated were that colonies were forbidden from trading with other powers other than the imperial power itself. Tariffs on foreign goods were extremely high, there were subsidies given to national industries by the government, and the government tried to run a trade surplus with everyone that it traded with so that precious metals gold and silver would flow into the home nation. It would flow into London from the colonies because they were running a trade surplus. Now probably the best exponent of these ideas of mercantilist theory was Thomas Munn, and this is the guy you see in the first extract there who wrote this book Treasure by Foreign Trade, which is certainly considered by Adam Smith to be the most brilliant exposition of mercantilist theory. And that is spelled right, foreign, it's just obviously old fashioned. Now these ideas, these mercantilist ideas, and then I won't read out that quote but you can basically see there what he's saying is the way a nation gets wealthy is by exporting more than it imports basically. It's all about circulation commodities. And these ideas really reached their high point in England with the long parliament of the 17th century, 1640 to 1660 I think, the English Civil War, that kind of period. And that of course is not surprising given the character of the conflict that was taking place in society at that time between the old feudal world and the rising capitalist class and the situation that created. And you can see then in extract two there the Navigation Act from that period, 1651. I've included the whole thing because believe it or not that is all one sentence, that paragraph. But I've underlined the important bit there at the end, which is basically talking about how everything that is imported into England, everything that is involved in English trade is carried out by English ships and by English sailors. And this leaves this kind of protectionist approach. And although the legislation that was passed in the Cromwell era was all withdrawn or revoked by Charles II when he was restored to the throne, they passed almost identical laws immediately afterwards. And they were collectively known as the Navigation Acts and these are kind of the best example of a mercantilist economic policy. So on from mercantilism then, the development of economic thought crossed over to the continent to France specifically in the 18th century, in the 1700s. And a group of thinkers known as les économistes at that time or people we know today as the physiocrats made a big step forward in their understanding of political economy on from what the mercantilists had. Because whilst the mercantilists saw wealth and value as being created by the circulation of commodities, the physiocrats saw value as coming from labour. It was the first step from productive work basically and it was the first step towards a labour theory of value. But there is a big caveat to this because at that time and particularly in France economies were largely agricultural. And so the physiocrats believed that it was only agricultural labour that produced value. Everything else they said, industrial labour and non-agricultural labour in any form, artisans merchants, all these people were unproductive appendages to the value producing system to productive work which was agricultural labour. Because they said that to be an artisan or a merchant you require the produce of the land, you require food in order to survive. So the real productive labour comes from the land and everything else is unproductive. And they said that profit then is simply rent taken by land owners from the productive activity that is carried out on their land basically. This was their understanding of political economy. A fferlachor François Quezné who wrote what he drew actually, this economic table, this tableau economic which is a diagram basically of how he saw the economy working. This is the best example of physiocratic theory around and you've got an extract of his explanation from the tableau economic there in number three. And you can see he's saying the productive expenditures are employed in agriculture blah blah blah. The sterile expenditures are made upon the handicraft products, housing, clothing and so on, other kind of labour. But nevertheless this was a step forward because it recognised labour in some form was the creator of value. The other reason actually the tableau economic is a step forward is because that diagram demonstrates interrelationships between classes within a national economy. They're not the classes as we understand them as Marxists, but they are classes of people within a nation and how the economy works on the basis of their interaction. That is also a step forward in comparison to mercantilist theory which was all about trade between nations, not about the internal dynamics of classes within a particular nation. Okay so moving on again then it was around this time actually the 18th century of course that the industrial revolution was gathering steam. That's a joke, that's an industrial revolution joke. That's as good as it's getting so enjoy it. It was around this time the industrial revolution was gathering steam picking up pace and here we come to the ideas of Adam Smith who wrote The Wealth of Nations in 1776, the year of the American Revolution. Now his ideas were based upon the ideas of the physiocrats and he was a very sharp critic of mercantilism. And he made yet another step forward then on top of what the physiocrats had done when he said that it's not just agricultural labour that produces value and creates wealth but it's labour in general. And so we can really say with Smith that we come for the first time to a general labour theory of value. It's crude and it's underdeveloped but it is nevertheless a labour theory of value in the form that we would recognise it from Marx's writings. Basically what he said is that the value of something is determined by the labour time involved in its production. And you can see that then in extracts four and five, both of which are relatively short. Take five as an example. If among a nation of hunters for example it usually costs twice the labour to kill a beaver, which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It's a labour theory of value. And we can say with Smith then who is referred to as the father of economics by bourgeois economists. We can say that he marked the beginning of a period of classical economy. People at Marx calls vulgar economists but this is what it means, classical economy. And these ideas were taken up and developed by other thinkers in that same period. Thomas Malthus probably best known for his ideas on overpopulation and so on. He did also develop other ideas in political economy. And he developed some of Smith's ideas as well and there's an extract from him. It was actually an extract from Marx at number six, criticising Malthus explaining that he did make a contribution. But in general Marx was actually extremely scathing of Malthus. And in that text, Theories of surplus value there, Marx describes Malthus's ideas as a childish babble. So he obviously is not a big fan. David Ricciardo then was probably, was also around at this time, also developed Smith's ideas. Ricciardo Malthus had some arguments, they had some disagreements but both of them fundamentally accepted the ideas of Adam Smith and just saw kind of different interpretations of some of the things that he said. But Ricciardo probably, certainly Marx's opinion, was probably the best representative of this school of classical economy. And you can see in extract seven there, his take on the, Ricciardo's take on the labour theory of value is a good explanation of it. And all the point is all of these thinkers, all of classical economy accepted the labour theory of value. Accepted the idea that the value of something is determined by the labour time involved in its production. Now these were the ideas of the Enlightenment. They were the ideas of the triumph of the bourgeoisie. They provided a very important insight into the workings of capitalism. These people, these classical economists, they were the immediate predecessors to Marx. And Marx's ideas, Marxist economics in particular owes a huge debt to these people. And we owe a lot, we should pay homage to their contributions because they allowed Marx to develop his theories on from the discoveries that they made. But of course these people also had major failings, major confusion in their ideas. I'll mention just a couple of these, I obviously can't go into it all. The first relates to commodity fetishism, which Marx does describe in capital, he describes what he means by commodity fetishism. And that description is extract eight. And you can see the bit I've underlined there. It's nothing but the definite social relation between men themselves which assumes here for them, as in the classical economists, the fantastic form of a relation between things. So I'll just explain what this means briefly. What he's saying is that capitalism as a system turns relations on their head. And it does this because there's a division of labour between people. When we think about the labour in society, it's not one abstract mass, it's divided up into the labour that each of us as individuals are capable of carrying out. And that therefore necessitates the production of individual commodities which to satisfy everybody's wants and needs must be exchanged, must be traded. There must be circulation of commodities. Now Marx says in reality, and we recognise this is clearly true, in reality what this is is an exchange, is a human exchange, an exchange between human people. Exchanging the product of their labour for the product of someone else's labour so that everybody can survive, it's an exchange between humans. But capitalism which bases itself on the circulation of commodities inverts that relationship which appears that the relationship is actually between commodities themselves or between people. This is what Marx means by commodity fetishism. It's taking that appearance, what capitalism makes it seem to be the case, and thinking that that is the reality. When in fact the reality of the situation is obscured beneath the surface. And Marx says basically to get to the heart of the capitalist system, you have to get beyond this commodity fetishism, you have to penetrate that surface and get beneath. And this was the mistake of the classical economists. They were unable, but they didn't penetrate beneath the surface of things. And this is the point that Marx is making in extract 9, again from theories of surplus value, where he's criticising Ricardo on this exact point. And I won't read out the extract, you can read it for yourselves, but I'll explain what he's saying. He's basically saying that whilst Ricardo did have a labour theory of value and understanding of what that meant, he didn't develop it to its fullest extent, he didn't develop that theory to its logical conclusion. He's saying that Ricardo basically looked at the circulation of commodities only in the context, or rather he looked at the labour theory of value, only in the context of commodities which once produced were circulating, and how much of one can be exchanged for another, that is determined by the labour theory of value. Commodities already produced which are currently circulating. What he didn't consider, what Marx says Ricardo didn't consider is the process of the production of those economies, the application of human labour to capital, that relationship between human labour and capital. That's what Ricardo doesn't think about in his texts, in his ideas. It's that human element basically that is obscured to Ricardo. It doesn't matter too much if I lost you a bit there, or if you don't understand the theory. The point is, Marx's criticism of these classical economists is that they didn't go sufficiently beneath the surface and penetrate through to the real heart of capitalism. It couldn't get beyond basically this commodity fetishism. Marx, with an understanding of dialectical philosophy, which I'm sure we're all at least on some level familiar with, obviously that is a philosophy all about penetrating beneath the surface to the real heart of things. Marx was able to do that and develop the labour theory of value accordingly, which I will come to later. So this is the first limitation of the classical economists, an inability to penetrate beneath the surface, unable to get past commodity fetishism. But the second limitation of the classical economists is that they regarded capitalism, and this is probably their biggest limitation, they regarded capitalism as an eternal system of society, an eternal way of organising the economy, as opposed to a necessary stage in human evolution. The result was that they tended to deny the contradictions of capitalism. They denied their importance and in some cases even denied the existence of contradictions. So we'll take as an example the contradiction of overproduction, which I'll describe in more detail later, although I'm sure we're largely familiar with it. But the idea that that crisis, a crisis in capitalism caused by overproduction could take place, was denied by the economists, the classical economists. They argued instead that the world economy would tend towards equilibrium, that everything would cancel each other out, and that every seller, every producer would find a buyer in the act of producing something, they would find someone who was willing to buy. And therefore things, whilst there might be ups and downs, eventually things would tend towards a natural equilibrium, everything would remain stable and settled and so on. And this idea was most clearly expressed by a classical economist called Jean Baptiste Sey, in something known as Sey's Law, and that is in extract 10. And you can see the last sentence underlined there. The mere circumstance of creation of one product immediately opens a vent for other products. Basically what he's saying there is that the system will tend towards equilibrium and stability. Now Mark's pointed out that, well basically he said first of all Sey, and these other classical economists, are correct when they talk about there being a separation between sale and purchase. That these are two separate events, two separate things under capitalism. But Sey of course says that these things eventually balance each other out. But Mark says it is actually that fact that Sey has identified, this fact of separation. It's precisely that fact that actually can cause or is certainly an element in causing economic crisis specifically of overproduction. Because he says as capitalism develops, what you see is the growth of things like fictitious capital, of globalisation. And what you see gradually as capitalism develops onto a higher and higher plane, you see more and more distance coming between the sale and the initial sale and the final purchase of a particular commodity. Because you end up with middlemen, merchants in the middle who will transport goods around, you can end up with more and more and more of them. And for the initial producer, actually you don't need to find a final buyer for your product before you can produce again. You realise the value of a particular commodity just by selling it to a merchant. And then you can go back and carry on producing before a final seller has been found. And so that is precisely that separation that Sey talks about as leading to equilibrium. Mark says it's actually that separation that can cause such massive crises of overproduction. Because you can produce and produce and produce because of the development of capitalism. But without actually having anyone who can buy it on the other end. This is the criticism that Mark's makes. And it is actually precisely that analysis then. Compare what Sey says to what Mark says there. And it's that Mark's approach of seeing capitalism as a developing dynamic system, as an evolving thing that grows and changes and creates new problems and new phenomena. It's at that point that sets Mark's economics apart from classical economy, which sees things in very stable, tending towards equilibrium, static kind of forms. You see this actually in all of Mark's writings. Mark's in Capital talks about primitive accumulation of capital. The earliest stage is almost a pre-capital stage. I will touch on primitive accumulation very briefly in a minute. The very earliest stages of capitalism. And then in the Communist Manifesto, as I'm sure we're familiar with, Mark's and Engel's talk about globalization, how capitalism is developing and this sort of thing. You see in everything you read about Mark's economics, you see Mark's approach to capitalism as being a dynamic system, constantly developing and changing. And it's very different to what this was a limitation that the classical economists had. They didn't see capitalism in that way. Now ultimately classical economy was doomed to be forever plagued by these limitations, by these contradictions. It was unable to ever, the theorists were unable to ever develop their ideas far enough to be able to overcome these things. And the reason is actually a, I suppose you could say it's a political one. Well, actually before we get to the political one, in the first instance, the ruling class, the bourgeois class, which these people represented in their ascendancy, they don't require a labour theory of value really. They don't need it. What good is it to the capitalist class? From their point of view, as long as the system keeps working, as long as they can keep making profits, crisis can be put off for a little bit longer, the system keeps moving, commodities keep circulating, everything keeps going along. There's no value to them, there's no use to them of having a labour theory of value. Serious political economy of the Smith and Ricardo kind is useless to them. What they're much more interested in is mathematical modelling and short term predictions of how to make the most profit in the next period of time. So continuing serious political economy, continuing development, the overcoming of these limitations, these contradictions, is not worthwhile basically for the bourgeois to invest time in that because it's not required for making profit. But actually we can go further than that and say it's not just that they didn't need it, it's they actively, at certain stage, didn't want to develop the ideas around a labour theory of value. They didn't want to develop political economy any further. The reason being that actually the idea that wealth is produced by labour is a very dangerous idea for capitalism. It's a very subversive idea actually. And of course as capitalism was developing, the working class was developing, it was gathering its own political representatives who were using exactly this idea of the labour theory of value to advocate the ideas of socialism. And that is exactly what you see in extracts 11, 12 and 13. 11 is a bourgeois saying this is a bit of a dangerous idea, we should drop this. 12 is a socialist saying this means labour should have complete control over the economy because we produce all the wealth. And 13 is obviously much later in 1927 but it's just making that point, explaining the same thing that I've just explained basically. That's what those extracts are. So not only did they not need it for making profit, they actively didn't want it because it represented a subversive idea. And this really is why economics as a science or political economy collapsed. To be replaced in academic circles with theories about basically how to keep capitalism going rather than how capitalism really works. And today this in my understanding is what is taught at university economics courses. They don't teach Smith and Riccardo and the labour theory of value. They teach marginal utility and things about how to make more profit, mathematical models, how to make more profit, how to keep the economy going rather than a deep understanding of the economy of the labour theory of value. It's the difference between a marginal utility theory and a labour theory of value. And really then it was left to Marx, we can say, to rescue the labour theory of value from the work of the classical economists as far as they were able to take it and for him to then develop it to its fullest extent. So I'll just briefly then discuss some of his basic principles. Marx also said that the labour theory of value is the central law of capitalism. It's the most fundamental question, the labour theory of value. And Trotsky in extract 14 there, Trotsky explained the basis of that law. And in my opinion that extract there is the most succinct, the best, kind of sharpest, most concise description of the very basic elements of Marx's economics. If you can't read it right now then you should read it later on. I won't read it out because I'm probably running a little bit short of time. But Marx basically sought to prove this labour theory of value and he did so in a way that was in my opinion much more clear than anyone who came before. And whilst he took the ideas from Smith and Ricardo, his proof of it, his explanation was much clearer. And for the proof of this theory of the labour theory of value he started his economic investigation with the commodity itself because he said that's the fundamental building block of the whole capitalist system. So I will also start with that now. He says first of all not everything in society is a commodity. Things produced by us for our own consumption are not commodities. If I grow vegetables in my garden for my own consumption that's not a commodity. Commodities he says are specifically things that are produced for exchange. And that's why capitalism is dominated by or the commodity form basically. The domination of the economy by the commodity form by the exchange of commodities is the hallmark of the capitalist system. It's the highest point that we had. There was commodity production obviously under feudalism in previous forms of society. But under capitalism it assumes the dominant form, the circulation of commodities takes over. Mark says that every commodity has two characteristics. This is all part of his proof of the labour theory of value. He says the first characteristic of every commodity is that it possesses what he calls a use value. It is useful in some way. It satisfies some need or some desire otherwise no one would want it. Secondly he says it has an exchange value that is a value which allows a quantity of one commodity to be exchanged for a certain quantity of another commodity. So every commodity has a use value and an exchange value. But with that point about exchange value a question arises which is how do you know how much of one commodity is another commodity worth? He says that there must be some property that is common to all commodities which allows them to be compared and exchanged in certain quantities. It's not a physical property because commodities that have nothing physical and common, no physical properties in common can still be exchanged. A pineapple and a mobile phone can still be exchanged in certain quantities and yet they have absolutely nothing. Colour, texture and no physical property whatsoever in common. Mark says that the one thing they have in common is the labour time required to produce them. This is the point then that he's making an extract 15. It's a long extract. It's from the first volume of capital. That's the point that he's making there. This is the base of the first step in his labour theory of value basically. Now you also see actually from that same extract in the third paragraph of it that Mark's adds something to his labour theory of value which is not present in the theories of the classical economists. Which is the question of socially necessary labour. He says it's not just a question of the labour time required to produce something. It's a question of the socially necessary labour time required to produce something. In other words, a lazy worker does not produce more value just because he works more slowly or more inefficiently than a regular average worker. Because that would be one implication. If you say the amount of time going into producing something is what gives it value, someone just works really unnecessarily slowly on something. Does that mean that what they produce is more valuable? Does someone who produces it comparatively quickly? And the answer is no. And it's because of this socially necessary caveat basically that Mark's puts in there. He says that the market decides what is socially necessary on the basis of the prevailing technological development on the basis of the average intensity of labour. And if a business is unable to produce commodities using only the socially necessary labour time based on these averages and the economy as a whole, then its cost of production will be higher than the price at which it is able to sell those commodities and therefore it will go out of business. So this socially necessary aspect is quite important. I could dwell on that longer but I do have time. Now Mark's also goes on then to talk about this question. I just mentioned price there and I've been talking about value up till now. Well price and value are very different things for Marxists. And he says Mark's explains that the price of a commodity does not necessarily correspond to its value. They are separate categories in Marxist economics. Price obviously is the money form of a commodity and price can fluctuate around the real value of a commodity. Or fixed to the actual value of a commodity. And this fluctuation then is determined by supply and demand, scarcity and abundance, this kind of thing. Have a look at extract 16, that's exactly what Marx is saying in coming out of value, price and profit there. Now this obviously is the realm of marginal utility theory, fluctuations in price and so on, with which modern economics concerns itself. But a lot of these modern economists, these marginal utility theorists, they say there's not just a theory of price, it is a theory of value. They equate price and value, they say they're the same thing that supply and demand in fact determines value. But Marx takes this idea on in value, price and profit. And he says to these kind of people that they weren't called marginal utility theorists at that time. But he says to whatever they were called at that time. He says look, what you can't explain with this theory is if you hypothetically say every commodity has its supply and demand entirely equal. What then determines the price of things? What then determines value? Basically if the supply and demand is entirely balanced out across the whole economy. How then do you determine what value is? And of course there is no answer to that on the basis of marginal utility theory. Because value, the point is value is an objective question. But marginal utility theory sees it as entirely subjective depending on the wants and demands and needs of the desires of individuals. This is the difference between a theory of value and a theory of prices. Unless we're able to separate those two things out then we won't actually understand how capitalism works. And that of course is the difference between political economy, specifically Marx's political economy, and modern economic empiricism. So thus far Marx has developed, he's explained very clearly the theories that came before him, of Smith and Ricardo and so on. And he's developed them slightly but not fundamentally. But now we come to probably the most important discovery by Marx. Because he poses the question, well look, in the final analysis if everything, if all commodities are exchanged at their value, as in over time and across the whole world all the price fluctuations cancel each other out and everything is being exchanged for its true value, then surely then everything will even out. Everyone will be getting what they deserve basically. Exchanges will all even out. So he says, well that leaves the question, where does profit come from? Where does surplus value come from if all values are actually fundamentally being exchanged for their correct value? And Marx explains that profit there and this is the crucial discovery. Marx explains that profit comes itself from another commodity, that commodity being labour power, the capacity to work, labour power. And he says this is a commodity that can, it's the only commodity that can produce more value than its own value. The classical economists were very confused over this, they didn't know whether workers were selling their labour or their labour power. Marx says categorically it's the latter, it's their capacity to work. They sell their labour, they sell their labour power. And this is a commodity, like any other. And so like any other, the value of this particular commodity, the value of labour power, is determined by the amount of labour time involved in its production, just like any other commodity on the market. So what does that mean concretely? Well what is actually involved in the production of labour power? What is it that enables labour power to exist as a commodity to work? What gives it its useful value? Why is it a useful commodity? Well it's food, it's shelter, it's clothing. These are the things that are required to produce labour power. Sorry I've skipped over extract 17 apparently. Oh yeah, well that's basically what extract 17 is all about. It's this question of labour power being a commodity. And there's also, it's also worth pointing out there's labour power involved in the reproduction of labour power if you like. Because it's obviously up to the workers to produce the next generation of workers. And so the maintenance of a family is also a cost involved with the production of labour power. And that therefore goes into the value of labour power. Now the employer then, having taken all these things into account and worked out the value of labour power. And employer will pay the workers the value of their labour power. That's the wages. And then put them to work. And by applying human labour to raw materials and basically producing commodities, the worker is adding value through their own labour time, through their own labour power. And this is obviously capitalism, I think it's called capitalism as we know it. Now it's worth making here a very, very quick, because I am limited on time, a very quick additional point, about how we ended up in this situation where one person is in a position where they can live off the labour power of others and lots of other people are in a position where all they own is their capacity to work. They're not in a position to do that. The answer is something I mentioned very briefly earlier. It's the question of primitive accumulation. It's what Marx referred to as the prehistoric stage of capitalism. And it's there in extract 18, there's a full description of it. The bit underlined says, the so-called primitive accumulation, therefore, is nothing else than the historical process of divorcing the producer from the means of production. It was that process that took place in England with the enclosure acts, that threw workers off the land basically, left them with nothing, owning nothing except their capacity to work. They owned no land, nothing they could use to survive basically. It was the turning of the, turning peasantry into landless wage labourers basically. That was the process of primitive accumulation of capital, which allowed then capitalism proper to develop. That's, that's a bit of a diversion, but it's part of the general explanation, so I'll put it in there. In the process of commodity production itself then, raw materials don't create new value. They just transfer the value that they already have. You can take a lump of wood and try and sell it on for more, and if you've got an idiot who you're selling it to, they'll pay more than what you paid for it, right? But it's not created any new value, it's still the same thing. If everybody in the whole economy did that, all that would eventually cancel out. Everyone would rip everybody else off, and no new value fundamentally would actually have been created. The raw material cannot create new value. It's only by applying human labour to that raw material, by carving it in some way, by doing something with it, that you create new value that allows it to be sold correctly at a higher price. Now, it's this that is the basis of profit, it's the exploitation specifically of the working class, of the labour power of the working class that is the basis for surplus value, what Marx calls surplus value, which we understand to be profit. So, to illustrate this exploitation and where this profit comes from, where the surplus value comes from, there's a whole section in capital about the working day. So, if we take an average eight-hour working day, we could say that the first four hours of that day, the worker covers his wages, covers the value of his labour power. But because he's selling his labour power and not just his labour, it's a contract for his capacity to work, not just the work itself, because that is the case, he has to then work another four hours, above and beyond what he's already produced to cover the cost of his wages. Now, this is surplus labour time, it's unpaid labour, and that extra four hours there is the source of profit. The drive to create more profit obviously leads the capitalist to try and extract more and more surplus from the working class. This can be done by lengthening the working day, instead of eight hours, have 10 hours, 12 hours, so that instead of just four hours surplus, you've got six hours or eight hours surplus, and that creates obviously more profit. Alternatively, you can increase the intensity of the work, force the worker to cover the cost of his wages in three hours instead of four by working extra hard, by working even quicker, and then you've got extra, you've got five hours profit, five hours surplus labour time producing profit instead of four. These are obviously the methods that we understand to be the exploitation of the working class, the intensification, the exploitation of the working class. And there are limits to these methods, obviously physical limits, there are only 24 hours in a day, there's only so far you can push people when it comes to lengthening the working day. And there are also moral and social questions involved, past conquests of the working class, the expected standards of living. There are certain things, certain barriers that the capitalist either can't or would find very difficult to go beyond, because of historical experience and this sort of thing, it's that sort of thing that can cause social unrest. Which the capitalist obviously don't have an interest in provoking. The point is that it's this discovery of the source of surplus labour. The thing that I mentioned before that Ricardo and Smith were unable to get to the bottom of, that human relationship, the relationship between human labour and capital. That is the basis of the Marxist theory, of Marxist economics, and it's what leads us to our theories of economic crisis as well. Because obviously by understanding this process, by understanding what I've just described, it means that workers are necessarily paid less than the full value of the commodities, of the goods that they produce. Which means that if the mass of people then don't have the wealth to buy back all the commodities that are being produced, because it's the vast majority of people who do the production. It's a tiny number who actually own the means of production. All those people are expected to buy back those goods that are produced. At a certain stage, that will lead to a crisis of overproduction. That's what we mean by overproduction. Now in extract 20, have I skipped over 19? I don't know, or you can see what 19 is anyway. Oh yeah, okay so that's the limits of exploitation is extract 19. Extract 20 then, which is the last one. You can see actually this is Marx commenting on another classical economist who did actually understand this fundamental contradiction in capitalism, this thing that workers are paid less than the full value of the goods they produce, a guy called Sismondi. And in that respect Sismondi actually stood above Riccardo, he was better on this point than Riccardo, because Riccardo didn't really understand fundamental contradictions in capitalism, didn't understand theories of crisis and overproduction and so on. And Marx explains here that Sismondi did actually understand the main point here, and it was on the basis of these ideas that Marx was able to develop. It was a fusion of all these different ideas from these different classical economists that Marx was able to develop into his theory, the labour theory value and how that leads to crises of overproduction and so on. Ultimately, as it says in the extract, Sismondi was limited, he was actually an underconsumptionist as opposed to someone that subscribed to the theory of crisis of overproduction. I'm not going to go into underconsumptionism, because I guess that will basically be covered in James' session later on the post war boom and Keynesian economics and so on. But he had limitations basically, but Marx again was able to build on that and overcome it and so on. And this is important for us because obviously it's this theory, I would say this theory of the crisis of overproduction, which can only be understood on the basis of a labour theory of value, which is the only explanation for the crisis that the world is facing today. Now, the conclusion then, we can say that the conclusion from these theories, specifically from the labour theory of value, is every bit as radical as the bourgeois politicians and political economists and so on were afraid of, because it basically suggests that the only sustainable route to further economic development is to end that fundamental contradiction, the contradiction between the social production of commodities by human labour of the working class and so on, to end the contradiction between that and the private appropriation of those things by the capitalist class. Because if you don't, as long as that contradiction exists, you will have crisis and all the rest of it. And it's only by understanding the labour theory of value that we get that. So it's just as radical as they were afraid of and Marx was able to take it to its logical conclusion. So I would just say that I mean hopefully I've tried to demonstrate these ideas are the product for a long period of economic development. And in my opinion, these are the ideas to study. If you want to understand classical economy, fair enough, might as well if you've got the time. But the way to do so is to study Marx's ideas. They are the high point. That is the highest point of political economy since then. It's been a downward trajectory. The bourgeois ditched political economy in favour of, as I say, modelling, mathematics, all worthwhile pursuits but not for understanding the economy and marginal utility theory and this sort of thing. In the words of Rob Sewell, these people are theoretically illiterate, the kind of economists that we have today from the standpoint of political economy. So for us, we should be studying Marx as the highest point, the highest development of these kind of ideas to understand the capitalist system as a whole. And hopefully that's what the rest of today will be about.