The Cooking the Books Column from the September 2010 issue of the Socialist Standard
In part two of his article “Is Marx’s analysis of capitalism still valid today?” (Freedom 31 July) Jonny Ball tackles Marx’s theory of surplus value which he correctly says is central to this analysis. This is how he presents it:
“Its basic premise is that in order to make a profit, the capitalist must pay the worker a sum lower than the amount the worker actually produces. The owners of the means of production, of Capital, will always try to keep costs, such as wages, to a minimum in order to extract the maximum amount of surplus value from their workforce, while those who do not own capital are obliged to sell their labour in order to live at a price that is determined not so much by the value they produce, but by the whims of an employer, who will receive the bulk of their workers' produce in the form of profit.”
No doubt Ball was trying to be sympathetic to Marx but, unfortunately, this is not a satisfactory depiction of Marx’s theory. Marx did see the source of surplus value as the unpaid labour of workers, but he never held the view that what workers were paid was determined “by the whims of an employer”.
Even when, in the 1840s, Marx spoke in terms of workers selling their “labour”, he argued the value of the commodity they sold was determined, as in the case of all other commodities, by the amount of labour-time required to produce and reproduce it and that its price fluctuated with supply and demand.
Later, in exile in Britain in the 1850s, when he had more time to study the workings of capitalism, Marx came to draw a distinction between “labour” and “labour-power”. Labour-power was the ability to work, the skill to produce something, while “labour” was the result of the exercise of these skills, the expenditure of labour-power. What workers sold to their employers was their “labour-power” not labour. Labour in fact couldn’t be bought and sold, only the commodities in which it was embodied could be.
So crucial was this distinction to Marx’s considered analysis of capitalism that when in 1891 Engels republished Marx’s 1849 article Wage Labour and Capital (still a basic introductory text to Marxian economics) he corrected the text on this point, explaining in his Introduction, “According to the original, the worker sells his labour to the capitalist for wages; according to the present text he sells his labour power” (Engels’s emphasis).
This distinction solved the problem of exactly how profit arose from the exploitation of workers. Workers were paid (generally and more or less) the full value of what they sold – their labour-power – yet were still exploited because the exercise of their labour-power produced a greater value than that of their labour-power. This “surplus value” was the source of their employer’s profit and of all capitalist property incomes.
Up until then pro-working-class thinkers and activists had tended to see profits as arising either from employers paying workers less than the value of what they sold (i.e. by cheating or swindling them) or from them selling what workers produced above its value (i.e. through profiteering or ripping off their customers).
Both these do go on under capitalism but Marx held that, as explanations of working class exploitation, they were unsatisfactory as they suggest that this has its origin in exchange not production and that it could be ended by “fair wages” or “fair trade” rather than by making the means of production the common property of all.