Value and Crisis

Labour Theory of Value

When you produce something, it costs you the time that you put into it. When, for example, you cook a meal, it might take you an hour to prepare the food. But imagine all the hours that have also gone into that meal indirectly: the time spent growing and preparing the ingredients, the time spent transporting and collecting them, the time spent honing your cooking skills, the time spent making the utensils.

Commodities, i.e. products that are bought and sold, have value (economic or exchange value) because of the average labour time put into them. So for example wool, in the abstract, has a value based on the amount of time it takes society (or the average worker) to make wool. It's average labour time which determines the overall value of wool in the abstract because some people can produce more or less in a given amount of time, but if the whole of society set about producing wool then the time it took to produce that wool per worker would by definition be the average.

The overall time that goes into a commodity includes: the time required to make the equipment that is used to make the commodity, the time required to "produce" (keep alive and productive) the worker that produces the commodity, and the time that the worker puts into the commodity directly through their labour.

Surplus Value

You can determine the value of the equipment (the means of production) and the value of the worker by looking at the average time it takes to produce them. This is where it gets interesting, as the time it takes to keep a person alive and productive can be less than the time that person can put into producing. In other words, people can produce a surplus, they can produce more than they need to survive. An individual can produce what they need to survive and then have time left over, to produce more or to have free time to pursue leisure activities.

Profit

Let's imagine that someone (your employer) owns all the equipment/means of production needed to produce a commodity, and they make an arrangement with you to allow you to use those MoP to produce commodities. In return they will pay you for your time. Now how much is your time worth? If it takes you, say, five hours to produce a commodity using the means of production, then it makes sense that they would pay you enough to keep you alive for five hours. But the work you do in five hours could be enough to keep a worker alive for longer than that, you could be creating a surplus. Where does the surplus go? It goes to your employer, who sells the commodity for more than they spent on you and the means of production. In fact, that's the whole reason they employed you: to end up with more money than when they started.

Employers are pushed by competition to make as much money as possible, to buy up means of production and employ more people, to make more money. If they don't then someone else will, who could then buy them up and ruin them. In this cutthroat environment, employers are motivated to pay workers as little as possible and collect as much profit as possible.

Crisis

This leads to a contradiction: employers want to produce more and more to make more money. But then overall employers will overproduce, pushing the price of commodities down, meaning that they will make less money. In response, some employers who are struggling to make a profit will cut the hours of workers or sack them. But this will reduce demand for commodities, which lowers prices even more. This leads to a downturn and slump. In a sense, capitalism is a victim of its own success: by producing plentiful commodities cheaply, it has become obsolete, but responds not by destroying itself but by throwing workers on the scrap heap.

This downturn, which is due to the price of things becoming so cheap that production can no longer yield a profit, is addressed under capitalism by restoring profitability, which can be done by the destruction or decay of means of production, creating new markets etc.

Degeneration

As technology and work practices develop which save labour time (it's faster to wash clothes now than it was 100 years ago), the value of commodities goes down because the average labour time required to produce them goes down. But this makes it harder for employers to make profits: the surplus grows but prices tend to fall. This means there is less ability for capitalists to expand and reinvest, capitalism is slowing down, and the forces of economic and technological progress are more and more stifled by the capitalist mode of production.

What this all means is that it is not in the interests of workers to continue capitalism. And economic crises lead to social and political crises, creating openings for revolution. Capitalism becomes more obsolete over time, and the task of converting society from capitalist to socialist becomes easier; capitalism sews the seeds of its own destruction.