Marx's aim in chapters 1 to 6 is to unravel the riddle of profit, and to establish the theoretical basis of moving from the level of markets and prices to investigating the organisation of labour. Every capitalist aims to 'make money', and most capitalists do. They start with a sum of money, M, and end with a bigger sum, M+. M ... M+. But how?
To know how we must understand how money represents commodities. The simple common-sense explanation is that price equals cost of production, that is, the value of the output of capitalist production equals the value of the inputs. With that approach: 'nothing remains but to declare rate of profit, and therefore profit, to be in some unaccountable manner a definite extra charge added to the price of commodities' (Capital volume 3 page 865).
Maybe prices are decided by supply and demand? At higher prices there would be a lot of supply, but not much demand; at lower prices, not much supply, but plenty of demand. The price is set at the level where supply equals demand. But then, also, profit would be inexplicable. The price is as high as it is because at any lower price, though demand would be higher, capitalists would not be ready to supply the goods. That is, they would make no profit. The supply-and-demand price can only be just high enough for capitalists to make the most miniscule profit. Again, we can explain profit, on this approach, only if we assume it, by saying that capitalists will not supply goods unless they make a certain rate of profit.
But what rate of profit? What law defines it as 5% or 10% or whatever? Orthodox economics deals with this problem by explaining profit as a composite of 'rewards' for various inputs which the capitalist has in fact supplied. The main capitalist input is supposed to be 'abstinence'. The capitalist with money M could have blown it all on big dinners and expensive treats, but instead invested it for a period, and so deserves a reward. Profit is the reward for waiting just as wages are the reward for labour.
However, this approach:
1. Explains only interest - not profit - if it explains anything at all;
2. If taken seriously, implies that profit rates will be high in countries where people are impatient, and low in countries where they are patient!
3. Ignores the fact that the capitalist investing millions in production has no desire at all to spend his whole fortune in one spree, any more than people in general desire to eat all their week's dinners on Monday. The worker waiting to be paid at the end of the month is the one more likely to be 'abstaining'.
4. Further ignores the fact that the capitalist class as a whole could not consume its whole wealth in one spree, even if they wanted to. How could they eat all the factories?
5. Fundamentally, gives no real explanation of economic facts, but only an attempted sentimental apology for them. See how patient the capitalist must be! Surely the dear man deserves some reward!
Other bits added on to the orthodox theory are in the same vein. Profit is supposed also to include a reward for risk, a compensation for the labour of management, and so on. In other words: see what risks the capitalists run! How hard they must work to regiment the workers! They deserve a reward!
Moreover, the orthodox theory still fails to explain pure industrial profit as distinct from and above interest, insurance premiums, managers' salaries, and so on. Orthodox textbooks in fact explain, at some point carefully hidden in the small print, that according to their theory that pure industrial profit is impossible - even though they don't dispute that it is the main driving motive of production.
'In the long run under perfect competition prices will settle towards levels at which there is nothing left over for the payment to the entrepreneur in excess of his managerial wage and interest on his capital...' (William J Baumol, Economic Theory and Operations Analysis, p.578).
We can escape the vicious circle, and explain the economic fact of profit from other economic facts (rather than from sentimental fairy-tales, or circular arguments) only if we can develop a theory which relates value to production. How does production add value to inputs? Marx proposes: by human labour. Human labour is the common factor by which diverse products can relate to each other as equivalents in the market. The production of new value is the allocation of different amounts of social labour to different spheres of social production.
However, Marx reckons that the concept of labour requires closer analysis. In the 'Introduction to a Critique of Political Economy' he wrote: 'Labour seems to be a very simple category. The notion of labour in this universal form, as labour in general, is also extremely old. Nevertheless 'labour' in this simplicity is economically considered just as modern a category as the relations which give rise to this simple abstraction...
'The fact that the specific kind of labour is irrelevant presupposes a highly developed complex of actually existing kinds of labour, none of which is any more the all-important one... The fact that the particular kind of labour employed is immaterial is appropriate to a form of society in which individuals easily pass from one kind of labour to another, the particular kind of labour being accidental to them and therefore irrelevant. Labour, not only as a category but in reality, has become a means to create wealth in general, and has ceased to be tied as an attribute to a particular individual. This state of affairs is most pronounced in the United States, the most modern form of bourgeois society. The abstract category 'labour', 'labour as such', labour sans phrase, the point of departure of modern economics, thus becomes a practical fact only there'.
That labour is expressed in the value of commodities - or, more exactly, that the expression of labour in the value of commodities has become economically dominant, rather than being a secondary aspect of life - implies and assumes some transformations in the nature of labour. Marx distinguishes between concrete labour (specific useful activity to produce a specific result; all human societies must have some varieties of concrete labour) and abstract labour, social labour, or social average labour (labour considered simply as the expenditure of an amount of average social labour-power).
The distinction between concrete labour and abstract labour is connected to the distinction between labour and labour-power. 'Instead of labour, Ricardo [an eminent economist writing before Marx] should have discussed labour-power. But had he done so, capital would also have been revealed as the material conditions of labour, confronting the labourer as power that had acquired an independent existence...' ('Theories of Surplus-Value', part 2, p.400).
Abstract labour is, as Marx puts it in his 'Contribution to the Critique of Political Economy' (p.45) a 'continuously emerging result', and so is labour-power. Profits arise because labour adds value to the outputs of production in excess of the value of the corresponding input, labour-power. The value of labour-power is defined by the labour-time embodied in the means of subsistence necessary to reproduce the working class.
In the exchange between capitalists and workers, on one level all is free and equal, but on the other it is very lopsided. In exchange for a given pittance to enable them to carry on in a state of relative poverty (sheer starvation at some times, a relatively comfortable existence at others, but always relative poverty), the workers hand over to the capitalists their creative powers - the whole creative powers of society, the whole power of society to produce new wealth. In exchange for maintenance in their relative poverty, the workers produce the wealth of capital.
Because labour is a 'continuously emerging result', it is continuously redefined by the capitalist in the workplace. The analysis of profit thus points us towards investigating the conditions of labour in the workplace, which Marx gave close attention to in a way emulated by no other economist before or since. That is the section of Marx's analysis which we will start to look at when we turn to chapter 7.
Notice that Marx does not start with the workplace, or with labour, or even with profit. One of his main purposes in Capital is to subvert common-sense ideas and to show that much that seems natural and straightforward is not so. That is why his argument can seem paradoxical, abstruse, or to be making unnecessary complications. Yet that aspect of Capital is central to one of its most practical purposes: to unchain working-class politics from the fetters of bourgeois ways of thinking.
Instead of just thinking that wages are low and should be raised, Marx wants us to envisage the abolition of the wages system.
Instead of just thinking that wealth should be redistributed more evenly, Marx wants us to envisage the abolition of capital as a social relation.
Instead of just wanting money to be shared out more fairly, Marx wants us to see that money is only a fetishised representation of social relations between human beings, and to envisage replacing that fetishised representation by more directly human relations.
Instead of just demanding 'a fair price' or 'the full fruits' of labour, Marx wants us to question the bourgeois form of labour.
Marx refuses to take his concepts of capital and labour ready-made from the 'appearances', the current usage, around him - though he does not deny that those appearances are real and need explaining. Instead, he starts from the flat empirical fact of commodities. He then dissects them into use-value and exchange-value. By dissecting exchange-value, he arrives at value, as a fact of production underlying the vagaries of the market. By dissecting value, he develops the concepts of abstract and concrete labour. By dissecting the forms of value, he develops the concept of money being a fetishised representation of social relations between human beings. From money, he develops the concept of capital, and its exchange with labour-power.
What is crucial for the following chapters is that Marx has shown that the drive of capital to exploit labour is not the result of ill-will by the capitalists, or a failure to apply the laws of fair exchange evenly, but a logic built into the fetishised representation of social relations between human beings innate to generalised commodity production, a money economy, and wage-labour as the basic mode of production.