1. Perfect capitalism has no monopolies, unions, government interference, special advantages for anyone. Just pure competition.
2. Each commodity sells at exactly its proper price (its value).
3. The value of a commodity is the labor (both direct and indirect) required to produce it (labor theory of value).
4. Capitalists (bourgeoisie) own the means of production (factories).
5. Bourgeoisie cannot raise prices above the value of a commodity because of the fierce competition.
6. Workers (proletariat) have only one commodity - labor.
7. Proletarians are free bargaining agents in the job market.
8. So far, every commodity, including labor, sells for its proper price and there seems to be no way to make a profit.
9. But, the value of labor is the labor required to produce it- i.e., the social labor needed to keep the worker alive. So, the proper price is a subsistence wage.
10. There can be profits if the means of production are efficient enough for the worker to produce more value than his subsistence wage. (For example, he needs $6.00/day to live and is paid $1.00/hour. Then if he works 10 hours/day, there is a profit potential of $4.00.)
11. The bourgeoisie have a monopoly after all - access to the means of production.
12. So, a worker who does not contract for a full day's labor (thus removing the profit base) does not get hired - assuming there are more workers than jobs (the "reserve army of the unemployed").
13. So, the bourgeoisie must exploit the proletariat or there is no profit.
14. The "extra" labor is surplus value.
15. The bourgeoisie will try to expand in order to increase profits.
16. Then more labor is needed, so wages tend to rise. But then surplus value (the profit base) tends to fall.
17. Marx rules out an increase in population as a means to restore the proper price of labor. (Malthus is "a libel on the human race.") the proletariat (who are, after all, the future ruling class) are too smart to breed themselves into oblivion.
18. The bourgeoisie instead expand by using labor saving machinery. So, some workers lose their jobs and join the "reserve army of the unemployed" which brings wages back to the subsistence level.
19. But, the bourgeoisie pays full price for the machinery. So, fewer workers means less profit.
20. Competition forces this process to continue, so the labor/production ratio falls until the profit base disappears.
21. Consumption dwindles as machines replace labor.
22. A "bust" occurs. Small firms go under. Goods are dumped on the market at below value.
23. Stronger capitalists get machinery at far below value. So, surplus value reappears and a "boom" begins.
24. Capitalism will proceed through boom/bust cycles. Competition for workers, higher wages, labor saving machinery, smaller profit base, still more competition, collapse, etc.
25. Each bust will be worse and gradually only a few large firms survive.
26. As monopolies emerge, the misery and exploitation of the masses increases until they revolt.