From the February 1986 issue of the Socialist Standard
It is a popular view that society is composed of many "classes'' with very little in common — convenient for our rulers when they feel it expedient to set one section of the ruled against another, as often happens during a strike. Thus we are told that there is an "upper class, an upper middle class, a lower middle class and a working class" when in fact there are only two classes in present-day society: the capitalists and the workers.
No doubt the person who has a "salary" of £15,000 a year, is provided with a company car and has a mortgage on an "executive home" in the suburbs would be horrified to be described as a member of the working class. Yet. as we will show, this is exactly the case. Moreover these persons' true economic interests are identical with those they like to think of as belonging to a much inferior class.
Capitalism is a system based on the production of goods and services for sale at a profit. This is the prime motive for economic production and profit can only be obtained by the employment of labour — that is, by the exploitation of labour.
Many people think of profit as something which is added on by the employer when offering a product on the market. If it were, then we would need to ask ourselves why, in the production of the same commodity, profit margins vary so much, why some employers even make a loss and go out of business. We would need to ask why employers are so concerned about wage levels when all they need to do when faced with a pay claim is add to the total cost of production, including wages, an ample margin of profit. To understand what in fact happens it is useful to reverse this way of thinking and start with the market price of the commodity or service being produced. In a simplified form the "equation of production" can be expressed as follows:
MARKET PRICE - (OPERATING COSTS + WAGES) = PROFIT
By "operating costs" we mean the cost of materials, plant, equipment, premises, services, and so on over which the employer often has little control. Wages however usually form a major part of expenses and if they can be reduced then the formula shows that profits will be increased. Here we see the first indication of a conflict of interest between employer and employed.
Wages can be cut in a number of ways: simply by reducing individual wages, perhaps by employing women instead of men; by holding down wages as the purchasing power of money is reduced by inflation; or by reducing the work force by the introduction of more efficient machinery or systems. By whatever means, the aim of the employer is to reduce the wage bill — not necessarily out of greed for higher profits but often to encourage investment in the enterprise and expansion of business in the face of competitors. And the need to minimise wages applies just as much to those of the "executive class" as to any other category of worker.
For simplicity, we have used the word "employer" in describing the conflict of interest between capitalist and worker. In fact, to an increasing extent, the employers are shareholders in companies of ever-increasing size. And shareholders must be single- minded in their pursuit of profit.
However, if we look again at our formula, we still need to know why there is a difference between the market price of a commodity and the total cost of its production which gives rise to profit. Put quite simply, the market value of commodities is determined by the total socially necessary labour time employed in their production. However, the employer does not expect to pay in wages the full value of the production contributed by the employees. The employer pays the market price of their employees' working abilities. In this lies profit. It is as if for part of the working day the workers provide for the value of their labour power and for the remainder of the day the value of their production belongs to the employer. This difference between the value of labour power and the value of work done is referred to as surplus value. Without it, there would be no profit. Without it, in a capitalist society, there would be no production.
The exploitation of labour must therefore be seen, not as something wicked devised by unscrupulous employers but as a necessary part of capitalist production. It must also be seen as applying at all levels of employment — from the so-called business executive down to the most poorly paid. All sell their working abilities on the labour market.
Last week's increased unemployment figures will have brought little joy to the Government. But they will gladden the hearts of those who run a new and highly profitable industry finding jobs for thousands of executives who come on to the market each month.(The Times, 3 September 1985).
In any important sense, the executive is in the same boat as the other workers — a member of the exploited or working class with the same cause of insecurity.
What then is the extent of this exploitation? It can be considerable and apply just as much to the production of services as to the production of goods. The Dixons Group, retailers of electrical and domestic equipment, in their report to shareholders, have calculated that the profit per employee in the UK amounted to £4.700 in the financial year 1984-85. The average annual wage of their employees is not given but a profit of £4,700 per worker can be compared with national average wages in 1984 of £9,300 for men and £6,080 for women. Moreover, the exploitation of workers at Dixons is increasing. In the financial year 1980-81 it was £2.400 per employee, rising steadily to £4,700 in 1984-85. Even allowing for inflation, this is an increase of over 50 per cent.
The capitalist class
To an increasing extent national economies are coming under the control of big business and this applies as much to the sale of services as to the production of goods. Even the so-called "professions" are increasing in unit size and have become dependent on the employment of large numbers of "salaried assistants". The person who works on their own and for themselves is disappearing and the small shopkeeper is being put out of business by the multiple stores. The gap between the capitalist class and the working class is widening. Those who live by the employment of others are becoming richer and to an increasing extent their incomes derive from the interest on invested capital —investment in the means of production: land, factories, banks, shops, offices, transport. As a result, the richest 25 per cent of the adult population own 80 per cent of the country’s wealth — and the individual wealth of half the adult population is less than £5,000.
Capitalists can be defined as those who can live comfortably, without working, on the interest from their investments, as many do.
In a socialist society there will be no classes; there will be no employers or employed. Capitalism's conflicts of interest and class antagonisms will disappear. Goods and services will be produced to satisfy human needs. For this we do not need employers. All we need is the materials of this earth and the knowledge and will to work — which we have in abundance. And, most important, production would not have to cease because a profit was not realised. It will be a world of plenty.