How Workers are exploited (1967)

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From the September 1967 issue of the Socialist Standard

The Law of Value holds that the values of commodities are determined by the quantities of socially necessary labour time congealed in them and that commodities, in the long run, sell at their values.

This Marxian analysis has stood the test of time. All other theories have been found wanting because they are, primarily, subjective rather than scientific. Two examples will suffice: marginal utility and supply and demand. There are no methods for measuring usefulness in any meaningful sense. Not all persons find fishing rods useful and the values of fishing rods are not governed by personal considerations. As for supply and demand, there still remains a value when supply and demand balance each other out, even though some economists maintain that there is a “natural price” when supply and demand equilibrate. Similar limitations apply to the "scholarly, profound” economic text books so popular today.

The evidence of experience has amply demonstrated that there is a correlation between the socially necessary labour time required by society as a whole for the production of commodities and the values of commodities. Both are not only measurable but labour, applied to natural resources, is the only source of wealth. (And this was recognised long before Marx’s time.)

Let us examine the unit of capitalist society: a commodity—an item of wealth for sale in the market. What distinguishes capitalism from all previous social systems is that buying and selling (the dollar bill) permeates every facet of life whether it be a rare art treasure or a loaf of bread; bibles or whiskey.

In the chart above, note the centre block. It represents the commodity. All items to the left of the block indicate hours (units) of socially necessary labour time. All items to the right of the block indicate units of value expressed in dollars.

For purposes of illustration, let us assume we are analyzing a $16 raincoat that took 16 hours socially necessary labour time to produce. Each hourly unit of labour time added $1 in value.

The manufacturer had purchased raw materials and machinery for the production of raincoats. The raw material that went into this coat cost $7 and the depreciation of the machine allocated to the coat was $1. It required 8 hours socially necessary labour time to produce the portion of the raw materials and machinery used up in making the coat. This $8 value was transferred to the value of the coat. It was a mere transfer because 8 hours socially necessary labour time was stored up in it before its use in the raincoat factory.

In order to convert the raw materials and machinery into a finished product, the manufacturer must hire labour power. Machines and raw materials, by themselves, are incapable of producing raincoats. It required 8 hours living labour to make this conversion. Living labour added $8 NEW value to the coat.

The total value of the coat is $16 produced in 16 hours socially necessary labour time.

In order to produce commodities, factory owners must buy such other commodities as raw materials, machinery and labour power (the muscles and brains of workers).

Labour power is a commodity owned by workers, who sell it in the market to capitalists. The value of labour power is determined in the same way as all other commodities: the socially necessary labour it takes to produce it, in other words the socially necessary labour time it takes to produce what a worker needs in terms of food, clothing, shelter, raising a family, training, minor luxuries, etc. This value is expressed in wages.

In the chart, the value of the commodity labour power is represented as being $4. At the end of 4 hours, the worker has created $4 worth of new value (replaced the value of his labour power). Everything should be even-steven. He had fulfilled his obligations and he should be through for the day.

But, lest we forget, labour power and labour time are not synonymous terms. Labour power is a commodity that the worker sells to the capitalist. Actually, labour power is really the only commodity that is exclusively his. However, once he sells it, it becomes the property of the capitalist to use as he sees fit. At the end of 4 hours, the raincoat is only half finished. The capitalist can only sell completed raincoats, which require 8 hours living labour to make.

Here comes the great discovery of Marx: How profits are made by selling commodities at their value and how the workers are exploited at the point of production.

The cost of production was $12 ($7 for raw materials, $1 for wear and tear of machines and $4 for labour power). The value of the commodity is $16. The 4 hours labour time the capitalist did not have to pay for are essential for profiting commodities and constitute the surplus value which belongs to the capitalist class. There is a doggerel called Surplus Value that goes:

The merchant calls it profits
  And he winks the other eye;
The banker calls it interest
  And heaves a cheerful sigh.
The landlord calls it rent,
  As he tucks it in his bag,
But the honest old burglar,
  He simply calls it swag.

Within capitalism, wealth assumes three basic forms: 1. Wealth, as such—things that satisfy human needs and social wants, part and parcel of that social animal, man. 2. In capitalism, wealth takes on the form of commodities — goods for sale in the market. 3. Likewise, wealth, within capitalism, also takes on the form of capital—wealth used to create more wealth with a view to profit. 

What is produced in capitalism is not primarily wealth to satisfy needs and wants (use values); it is surplus value for the capitalist class. It can be said that the capitalist class is a consuming class; it consumes the chief product of capitalism—profits. The workers, like the machines and the cattle, merely consume the necessities to keep them in good working order.

The ownership of the means of producing wealth (capital) rests in the hands of the capitalist class. By virtue of this ownership they are enabled to extract surplus value out of the sweat and blood of the working class.

The mechanism for accomplishing this objective is variable capital—the self-expanding capacity of labour power to create a value greater than itself. As noted above, the raw materials and machinery merely transfer their own value to the finished commodity. That is why they are described as constant capital. 

This chart serves a useful function in the movement for Socialism. It gives a visual picture of basic Marxian economics and presents a panorama of the Marxian Law of Value. For over thirty-five years it has been very effective for use in economic classes. It has been instrumental in encouraging further reading of the Marxian classics and paved the way for a clearer grasp of their contents.

Isaac Rab

(WSPUS)