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Labor Power as a Commodity and the Transformation of Money into Capital

1. The Form and Essence of Capital

Capital initially appears as a certain amount of money, but money itself is not equivalent to capital. There is a clear distinction between money as currency and money as capital. In the formula "C-M-C," where C represents commodities and M represents money in circulation, the goal of this formula is to obtain use value through the circulation of commodities. In the formula "M-C-M'," where C represents commodities and M represents money not just in the general sense but as capital, and M' represents money that has undergone value augmentation, the general purpose of capital movement is value augmentation, which is why this formula is called the "general formula of capital."

Formally, the general formula of capital contradicts the principle of commodity exchange. The law of value requires that commodity exchange follows the principle of equivalent exchange, meaning that no new value can be created in the exchange process. However, the general formula of capital suggests that capital creates new value in circulation. The key to resolving this contradiction lies in the transformation of labor power into a commodity.

2. The Basic Conditions for Labor Power to Become a Commodity

Labor power refers to a person’s ability to work, encompassing both mental and physical capacities. The utilization of labor power is labor itself. Labor is an essential condition and fundamental element for production in any society; without labor, the existence and development of human society would be impossible.

For labor power to become a commodity, two basic conditions must be met:

  1. The worker is legally free: The worker has the legal ability to treat their labor power as their own commodity to be sold.
  2. The worker has no means of production: The worker lacks any means of subsistence, thereby being compelled to sell their labor power to survive.

These conditions for labor power to become a commodity did not exist from time immemorial; they gradually formed during the primitive accumulation of capital in the late feudal period. The transformation of labor power into a commodity marks the development of simple commodity production into a new stage of capitalist commodity production. In this stage, the relationship between capitalists and workers formally appears as a "free" and "equal" buying and selling relationship but is essentially a relationship of capitalist control and exploitation of workers through wage labor. As Marx stated, “The Roman slave was held by chains; the wage laborer is bound to his owner by invisible threads.”

3. The Characteristics of Labor Power as a Commodity and the Transformation of Money into Capital

Like any other commodity, labor power also has value and use value. However, labor power is a special commodity, and its value and use value have characteristics that differ from those of ordinary commodities.

The Value of Labor Power:

The value of labor power is determined by the value of the necessary means of subsistence required for the production, development, maintenance, and perpetuation of labor power. This value consists of three parts:

  1. The value of the means of subsistence necessary for the worker's own survival.
  2. The value of the means of subsistence necessary for the survival of the worker's family.
  3. The expenses for the worker’s education and training.

Because the composition of labor power's value includes historical and moral factors, the quantity and composition of the necessary means of subsistence can vary in different countries or historical periods within the same country. Therefore, the minimum limit of labor power's value is determined by the value of the indispensable means of subsistence required for life. If the value of labor power falls below this limit, labor power can only be sustained in a diminished state.

The Use Value of Labor Power:

The use value of labor power as a commodity is distinct in that it is a source of value; in the process of its consumption, it can create new value, and this new value exceeds the value of the labor power itself. It is precisely due to this characteristic that, once the owner of money purchases labor power and consumes it, they can not only recoup the value they paid for this special commodity but also gain an augmented value, known as surplus value (denoted by m). Once the labor power purchased by money generates surplus value, the money itself is transformed into capital.

4. Capital and Surplus Value

Capital is value that can generate surplus value. Surplus value is created by the surplus labor of wage workers. In capitalist society, capital always manifests through various objects, but capital is not a mere object; it is a specific social relationship of production belonging to a particular historical social formation, embodied in an object, and endowing that object with a unique social character. This is the production relationship of the bourgeoisie, the production relationship of bourgeois society.