How is it that M' is bigger than M in the M-C-M' model of circulation?
The M-C-M' circulation appears at first to be paradoxical. It describes a circulation where a capitalist purchases a group of commodities (for example labor and raw materials) at their value, and then later sells them at their value, for a profit. Where might this extra money come from? The answer comes from the idea of surplus value. Surplus value is the excess (M') that the capitalist ends up with at the end of an M-C-M cycle. The commodities the capitalist buys are being paid for in full-value (M-C). Therefore, in order to gain surplus value we must be able to create value through the use-value (consumption) of one of those commodities. This is the only way that we could end up with more M than we started with (C-M'). This actually happens with labor-power. Labor-power's value is the amount of money it takes to keep the worker functioning. However, in the capitalist's consumption of the labor-power, he can receive total value greater than the value of the labor-power. Therefore, when the product is sold for its value, the capitalist receives a profit. This is exploitative of the worker, but the worker has no choice because he doesn't own any means of production, and therefore doesn't have the option of working for himself.
According to Marx, is there room for compromise between the interests of the workers and the interests of the capitalists?
Marx sees little room for compromise, and is in fact critical of socialists who believe that the evils of capitalism can be eliminated through reforms that preserve the essential structure of the system. The interests of capitalists conflict directly with those of workers. By his nature, a capitalist seeks ever- expanding profit. This, however, can only be achieved through exploiting the surplus-value of a worker's labor. To remove the exploitation would be to eliminate the capitalists. Thus, compromise is not possible. Furthermore, the entire social system protects and preserves the interests of the capitalists. The legal institutions and social structures have been made by the capitalists, and therefore are intended to preserve their own mode of production. When capitalism is overthrown, which Marx believes will happen, this overthrow will have to be a violent destruction of the entire social system.
What is the labor theory of value? What are the potential criticisms of this theory?
The labor theory of value begins with the concept of exchange-value. Exchange- value reflects the relationship between different goods, how much of one good is worth another one. However, if these goods can be compared at all, there must be something common between them. For example, what could make a desk worth two chairs? Marx's answer is that both required the same amount of labor-power to produce them. This labor-power is the value that the desk and chairs share. Their exchange-value comes from this value. Marx uses this theory of value in his discussion of the exploitation of the worker and the circulation of capital. One potential criticism of this theory is that is doesn't adequately account for all kinds of exchange-values. Marx says that there are some things with use- value that don't have value because there was no labor input. Things like forests would be examples of such use-values. However, in reality such things do have exchange values. Marx does not really address how these things fit into his overall theory. One could also argue that Marx does not leave sufficient room for consumer demand in his labor theory. Depending on the popularity of a given commodity, its exchange-value would likely vary considerably. While the amount of labor input would have to have some impact on exchange-value, practical experience would seem to suggest that it is not the sole influence.