Having so far concentrated on philosophy and politics we now turn to what was the major part of Marx's output, namely the economics. But it is in the economics where his political philosophy begins to take on real form. There is not space enough here to cover the enormous range of his economics but there are a few basics which need to be dealt with in this slightly longer piece and which can be fought out below the line as usual.

Alan Budd, who was an economic adviser to Margaret Thatcher in the 1980s once made an interesting point about Marxist economic theory and government policy on the fight against inflation at the time:

"[People] did see that it would be a very, very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes – if you like, that what was engineered there in Marxist terms was a crisis of capitalism which re-created a reserve army of labour and has allowed the capitalists to make high profits ever since."

Marx's basic starting point was that in contrast to all previous historical epochs capitalism is a system of "generalised commodity production" in which the workers' abstracted labour power itself became a commodity to be traded.

In all previous epochs, human labour had been used to create a surplus product, usually subsistence farming and a surplus used for first bartering and then trading.

Under the ancient mode and slavery through to feudalism, the product and the means of producing it was clear; food, clothing, the means of life. You worked for the master and you belonged to the master in one way or another. The German word for serf, for example, is Leibeigener; your body literally belongs to the master. Capitalism liberates you from that and turns you into a free agent, apparently able to enter into a free contract to sell your labour to whomsoever you see fit. You are cast out of your old existence and are set on the route to making your own. The second verse of All Things Bright and Beautiful – "the rich man in his castle/ the poor man at his gate/God made them high and lowly/ and ordered their estate" – no longer applies. Whereas before you were a bondsman, now you are a journeyman and you can set off to make your own fortune, as the fairy tales have it.

In economic terms, what before was a tangible surplus product is now transformed into intangible surplus value. You enter into this apparently free contract with an employer but the wage you draw from that employment is only a part of the value you create. Just as before a portion of the cabbages and linen you made belonged to the master, now a proportion of the monetary value you make through the production process belongs to the employer and you will only be employed if a competitive rate of surplus value can be generated through your labour. This is at the root of Marx's version of the labour theory of value. The employer will provide the machines or tools for the completion of the task (constant capital) while the worker provides the labour power (variable capital). The employer will always be trying to improve labour productivity and can do so in various ways, but all of them boil down to improving the gap between your wage and the amount of value created by your labour power.

This means that for Marx the commodity labour power has a special character in that it is the only commodity which can be employed to increase value, while all the others are merely reified forms of dead human labour, useless without labour input. An advanced car-producing robot no more creates value than does a peasant's shovel. In theory there is no difference here to previous epochs where we accept the labour theory of value because it is measured in tons of cabbages and yards of linen but now that it becomes a commodified and monetarised relationship it also becomes a quasi-mystical one, with value apparently emerging mysteriously out of all sorts of transactions and technologies and with market mechanisms and competition wiping out and obfuscating the distinction between what it costs to produce something and its price.

On these threads, for example, a critique of Marx has emerged which posits a kind of paradoxical capitalist utopia in which we have reached 100% automation of production with no labour input at all anywhere by anyone. This reductio ad absurdum is of course as realistic as the world of Arnie's Terminator or of Joh Fredersen's Metropolis in which workers become surplus to requirements, but it does serve to illustrate a point because the further question then emerges as to how the goods produced are going to be purchased if no one is earning any wages through the productive process.

Under capitalism labour productivity may improve massively, but it can never be reduced to zero because that would remove all demand for the goods produced. You would then have to distribute commodities or vouchers to the entire population based on some sort of criteria not linked to labour input and then where do we end up? Oh, of course, at communism, in which each gives according to their ability and receives according to their need. Capitalist competition over labour productivity thus not only produces its own gravediggers but also provides the shovels (or robots) to finish the job.

Labour productivity can be increased in all sorts of traditional ways such as making workers work harder for less money, speeding up the production lines, extending the working day, getting people to work longer for the same or even less money, seeking out newer, cheaper labour sources through globalisation etc and, as Alan Budd points out, all of the above are regularly used, but for Marx they all only put off the dread day of collapse in which the workers realise that the harder and more productively they work, the smaller the proportion of the surplus value they create comes to them.

Since the mid-1970s the common way to put this off has been through enormous levels of debt, either by the state or the private individual. It is that tendency which both brought about the collapse of the Soviet Union – which over-borrowed in order to maintain full employment as a political necessity without raising productivity – and the current crisis in the west where a debt-fuelled asset price bubble in order to artificially stimulate demand has created the greatest economic crisis in a century.

But for Marx, at the root of it all is the question of how surplus value is created and distributed and, most of all, what this does to human relations and desires. The commodification of labour power also brings with it the commodification of humans and their alienation from both themselves and the products of their labour power. It is an accusation often aimed at Marx that he reduces human beings to mere expendable specks of matter within the greater economic scheme of things, but it could be argued that the opposite is the case and that the whole point of Marxist economic analysis is precisely about trying to bring about a recognition that it is generalised commodity production which has commodified people and that it doesn't have to be like that.

The final two columns in this series will go on to discuss how this process of economic alienation feeds through into religion and ideology and the means by which people manage to cope with being mere playthings of larger forces; how a sense of autonomy, faith and hope are maintained in an apparently constrained, rationalistic and futureless world. This will bring us right back to where we started: the land of Ideologiekritik.