Analysis of Wealth. II. Surplus Value. (1916)

From the July 1916 issue of the Socialist Standard

Link to Part 1.

In a former article under this heading the writer tried to show that the substance of value, the common property of all commodities as such, is social labour, measured by the time taken in its expenditure. He tried to show further that money serves as a measure of values, a standard of prices, and a medium of circulation, only because it is itself a commodity, that is to say, it embodies social labour in the same manner as do the articles for which it is exchanged. He tried to show still further that the production of commodities, i.e., articles for exchange, and the use of money are features of a certain stage of development in the means and methods of production and in the control thereof, and are destined to disappear with future progress.

We have now to consider money a little further in the form of capital in the process of accumulation, or in other words, the phenomenon of “money making money.” For money in itself is not necessarily capital. Only when it is used for the purpose of adding to itself does it become so. When the independent producer (peasant or handicraftsman) brought his goods to market he received for them a certain sum of money which sooner or later he expended on articles of a different sort, largely for his own personal use and partly, of course, to buy fresh raw material, etc. To him the money entering transiently into his possession was not capital. Nor were the goods he sold, for he received in exchange goods of equal value. No interest, no profit, accrued to him in the transaction.

Otherwise is it with the modern capitalist with a sum of money, which is constantly expanding in volume. He buys commodities not for consumption by himself, but in order that in some form or other he may re-sell these commodities and realise a profit on the transaction. Apart from this profit his activities as a capitalist would be meaningless.

The independent producer bought commodities mainly in order to realise their use-value in his own person. The capitalist buys them only to throw them back into circulation and receive in return an increase in exchange-value. The simplest definition of capital, then, is money thrown into circulation only to be received back again with an increase to itself, which increase becomes part of the capital which is again advanced to return with a fresh increase.

This increase or profit Marx calls surplus-value. The problem of its origin is the central one in economic science, and its solution holds the key to an understanding of all the workings of capitalism.

The quest for profit is the mainspring of the present social order. Let us take the mainspring out of the case and examine it.

In the first place, it is obvious that money must go into circulation in order to increase itself. If it simply lay in a safe it would remain the same in quantity. Thus is the modern capitalist cuter than the old-fashioned miser. Being a “true Christian” he refrains from the stupid, worthless process of hugging his money to himself, and lets it go believing implicitly in the words of his Lord : “Whosoever would save his life the same shall lose it, but whosoever loseth his life for my sake [“profits’] the same shall find it.” But bearing in mind that on the average prices are determined by values, and these latter by the socially necessary labour embodied in commodities, it is also clear that the circulation of money cannot in itself give rise to profit. On the average the capitalist buys commodities at their values and sells them again at their values. He exchanges equivalents, and unless some increase of value takes place between the two acts of buying and selling he can realise no profit. Various orthodox theories have tried to see the origin of surplus value in the process of exchange. The investigation of these theories, however, shows them to be based either upon the confusion of use-value with exchange-value or upon the illusion that prices (and implicitly values) are determined by the arbitrary will of the owner of commodities or by mere chance.

In dealing with capital the scientific economist is concerned not with an accumulation of use-values, but of exchange-value in the form of money ; which accumulation, moreover, is not made by one or a few capitalists at the expense of the rest, but by the capitalist class as a whole. The origin of surplus-value is, therefore, to be found in production, or in other words, in the productive consumption of the commodities originally purchased.

All commodities which are consumed in order to re-appear as new commodities may be said to be productively consumed. For instance, leather purchased by a boot manufacturer is consumed in the factory to reappear as boots. The boots, moreover, contain more value than the leather, since they embody additional labour. This additional value, however, is by no means necessarily surplus-value. Imagine, for instance, an independent boot-maker purchasing his own tools and raw materials and selling his own product. The value of the raw materials, etc., is transmitted to the finished product, which, in addition, contains the value added by the bootmaker’s labour. The boots are sold for more money than was paid for the leather and the tools, but no surplus-value has been realised ; money does not in this instance make money. The raw materials, etc., do not transmit more value than they themselves contain ; all the increase is due to the boot-maker’s labour. The difference between the original outlay and the price he gets for his commodity is simply equal to the value he has added. The effect is the same as if he had made no outlay but produced a new and distinct commodity and sold it. His money has not expanded itself ; he has simply added to it. In short, it is not capital. Men do not become capitalists and wealthy in the modern sense by themselves adding value to natural objects. Rather, the increase of their wealth is obviously independent of their efforts and totally out of proportion to any they might make.

Nevertheless, seeing that all value is but the embodiment of labour, surplus-value, being a particular form of value, can only be derived from labouring in some fashion. Therefore in order to obtain surplus-value the capitalist must find in the market not merely ordinary commodities (which are in capable of producing for him more value than they themselves possess) but some commodity which actually produces value, i.e., labours. This commodity he finds in the energies of the modern wage-labourer. It matters little to the capitalist what other commodities he deals in. Food or clothing, luxuries or necessities, all alike embody labour, therefore it is the labouring commodity which he essentially requires in order to obtain profit.

When the capitalist purchases other commodities he buys congealed labour : labour which is past, dead, inactive. From them alone he can expect no increase of value. In buying labour-power, however, he secures the potential source of all further value. So far as he is concerned the special function of labour-power is to produce value and, above all, surplus-value. With the usefulness of labour-power, in any other sense he is not concerned, any more than he is concerned with the utility of the goods he sells. Capital being but a sum of exchange-values, its sole passion is for its own growth by the production of more exchange-value, which means the continual consumption of labour-power. It remains to show how by this consumption surplus-value is actually produced.

Labour-power, like every other commodity, possess an exchange-value, which is realised in a price, termed wages. The amount of this exchange-value is determined by the labour-time spent in its production. The average wages of any section of the working class depends upon the cost of its customary necessities of life, including such special education as may be necessary in the branch of industry in which it is employed. It is obvious that wages cannot be long depressed below this standard without impairing the productive efficiency of the labourers’ energies. On the other hand, if they rise far above this standard the surplus-value is encroached upon. For surplus-value is nothing more than the difference between the wages of the labourers and the sum total value of their product. Were the labourers in the habit of producing no more wealth than would keep them, in working condition surplus-value would be impossible. The labour market, like the market for other commodities, is liable to fluctuations, but experience shows that these cancel one another, and that the general level of wages is such as will maintain the workers in their daily tasks.

But though the price of labour-power is limited in this way, the limit of surplus-value is simply the productivity of labour-power. Anyone purchasing a conmodity acquires the use of it, and the capitalist only buys labour-power in order that he may use it up, i.e., set it to produce the greatest possible amount of exchange-value in the form of commodities. Here we may take examples from Marx (“Capital,” Vol. I. p. 106).

Marx first supposes a capitalist advancing a sum of 15s. which is split up as follows : 10s, is the price of 10 lbs. of cotton ; 2s. represents the value of wear and tear of machinery, etc.; 3s. is paid for the hire of labour-power. We have thus a sum of 12s. as constant capital, i.e., value which passes unchanged into the form of the finished product, yarn. This is assumed to be the product of two days labour of twelve hours each, i.e., two hours labour is embodied in a sum of 1s., or a commodity of that value. Supposing now that in six hours the 10 lbs of cotton are converted into 10 lbs of yarn, The yarn contains thirty hours labour ; twenty-four being spent in producing raw material, etc., and six in converting it into finished product. Its value,, therefore, is 15s., i.e., 1s.for every two hours labour.

Here no surplus-value is created, for 15s. was the sum originally advanced. By only working six hours the labourer has done no more than produce an equivalent of his wages, 3s., and the capitalist makes no profit.

Marx now gives a second case. In this the capitalist advances 27s. Twenty lbs. of cotton are bought for 20s., and 4s. is allowed for wear and tear. The labourer is paid his wages of 3s., but instead of working only six hours is made to work twelve, having exactly twice the amount of raw material to convert into yarn. This time the yarn represents 60 hours labour, 48 being contained in raw material and twelve being added in the process of spinning. If 30 hours labour are represented by 15s., then 60 hours are embodied in 30s.

The capital advanced was 27s., so that the capitalist makes a profit of 3s. when selling the goods in the market at their value.

These simple examples illustrate the whole character of capitalist production. Carried on as it may be with all due regard to legal forms, it yet consists of a process of robbery disguised by the exchange of equal values.

The capitalist certainly gives the labourer his “due,” i.e., the value of his energies, or in other words, the cost of production of his commodity labour-power, but if the labourer simply replaced this value the capitalist would gain nothing. For him the transaction is meaningless unless the worker produces far more than that, unless, in fact, his whole life-time becomes but a process of producing value.

In further articles the writer hopes to outline how capital in its lust for self-expansion pushes the exhaustion of labour-power to its limits. For the present it is as well to remember the cause of the subjection of labour-power to capital.

The worker sells himself (in the form of his energies) as a commodity. Why ? His obvious motive is to obtain his price, wages. These as we see, however, only represent sufficient to keep him in existence. It follows, then, that he lacks the means of subsistence and must purchase them, which still further implies that he does not possess the wherewithal to produce them. This is another point to be dealt with later.

Eric Boden

[To be continued.]

Analysis of Wealth. I. Value. (1916)

From the June 1916 issue of the Socialist Standard

Although from time immemorial the mass of objects which we term wealth has formed the basis of humanity’s existence, it is only of recent years that a scientific investigation of the conditions of its production and distribution has arisen. This is indicative of a development of these conditions, for if there was in the past a lack of effort to solve economic problems, this can only be because these problems existed, if at all, in an obscure, immature fashion. In the days when small local communities were practically self-supporting and articles only rarely exchanged on their borders, it was obvious enough that wealth was the direct product of labour for individual consumption. Likewise in the earlier stages of production for exchange the seller of commodities knew them to be his personal products and attached no miraculous import to the money for which he sold them and with which he purchased the products of men likewise known to him. With the complexity of full-blown capitalism, however, the workers become separated from the commodities produced by them, which acquire a mysterious knack of realising more in their sale than what was laid out in buying the necessary factors for their production. Henceforth wealth seems to spring from nowhere—money makes money; and problems present themselves for solution.

Founded upon the very conditions which give rise to the problems, however, is the power of the capitalist class, who have a pretty sure instinct that a real economic science is inimical to their interests since it unavoidably exposes their parasitical position in society. It can readily be understood, therefore, that prior to critical revolutionists like Karl Marx developing the science in working-class interests, only a few isolated truths were revealed by the studies of honest, if orthodox, inquirers likewise few in number ; while the mass of so-called economic literature became of an apologetic character seeking to obscure, in capitalist interests, the very problems it pretended to elucidate.

Members of the working class, having nothing to fear from criticism of a social order which entails nothing but poverty for them, may find in the writings of Marx a clear, if elaborate, analysis of the facts of their existence. Time spent in their study, snatched though it be from scanty leisure, is repaid by the acquisition of an undying purpose in life and the joy of knowledge with which to carve the road to power. If in the following paragraphs the writer can outline the main points of Marx’s economic theory in such a way as to arouse interest in some hitherto apathetic or hostile mind, his immediate object will be served. If the inquirer be worth his salt he will not rest till he is intellectually equipped for the conflict with capital.

The unit of modern wealth is the commodity, which has three essential features. Firstly it must satisfy some human want ; be useful. Secondly it is a product of human labour, a conscious adaptation of nature ; while lastly it must be exchangeable for other useful labour products. It must find its way into the social market else it is no commodity.

Thus a commodity is a combination in an object of utility and exchangeability, or in other words, of use-value and exchange-value. The former is due to its natural qualities (physical, chemical, etc.,) and also distinguishes it from any other commodity. It is this difference in usefulness which leads to the exchange of commodities, although it by no means determines the ratio in which they are exchanged. Any given commodity vendor does not exchange, say, boots for boots, but for some article of wealth which has different properties. On the other hand it would be absurd to say that boots are as useful to him as the commodity he receives in exchange. Any attempts, therefore, (and there have been many), to explain exchange-value through utility are futile. Exchange-value is a relation of equality, while a comparison of the use-values of commodities simply reveals their differences or inequalities. What, then, is exchange-value ? If we take a pair of boots and a ton of coal, each selling say for £1, we have three commodities (including the sovereign) of equal value. Compare as we may their relative weight, colour, smell, size, or any other tangible property, we can discover no equality between them. Their uses are different and it is highly improbable that the relations of supply and demand in coal and boot markets respectively are identical at any given moment. We are thus left with only one feature common to all these commodities, viz., they are products of human labour, they embody human energy. In this respect they may be compared and an equation between them arrived at if we measure the energy embodied in them by the time occupied in its expenditure. If, then, our imaginary pair of boots and ton of coal are equal in value, it can only be because they contain equal quantities of labour or. in other words, have taken an equal length of time to produce.

It is important to remember here that commodities are social products and presuppose the division of labour in society. Producers of coal and boots or of any other special product cannot exist on their commodities alone ; they exchange as a matter of necessity. In consequence they seek to minimise the length of time taken in producing any given commodity in order, by the cheapness thereof, to secure a certain sale. If, therefore, someone takes up unnecessary time in the production of a commodity its value in exchange ia not enhanced thereby. It is the socially necessary labour-time alone which forms value.

Another result of the division of labour is the difference in quality of the forms of labour which produce different commodities. Certain occupations exhaust more nerve and muscle in a given time than others. Their products therefore contain more value in proportion to the intensity of labour in excess of that embodied in other commodities. This, however, by no means affects the fact that they are reducible to one common element, simple labour-power ; the more intense or skilled labour simply counts as a multiple of ordinary labour. Labour remains the factor which determines value.

This fact in the key to the door of economic mystery. Ignoring this, the professional “political economists” have endeavoured to lead us down one blind alley after another, beguiling us the while with romantic yarns concerning the awesome and unapproachable majesty of Money arrayed as Capital, embodiment of all the attributes of God, before whom the knees of men must bow for ever. Let us try to use the key and enter the holy presence. Mayhap ’tis a gilded skeleton, after all with which they would scare us.

Value (by which we continue to mean exchange-value) does not exist apart from material, valuable objects, any more than weight exists apart from things which are heavy, or heat apart from hot things. In measuring or expressing the value of a commodity we are, therefore, compelled to use some other commodity as an equivalent.

In common practice we use gold and say, for instance, 1 pr. of boots is worth 1 sovereign ; but if 1 ton of coal is also worth £1, then we might just as well say, 1 pr. of boots is worth 1 ton of coal or any other commodity which exchanges for £1. £1 serves as an expression of the value of the boots only because, like the boots (and the coal), it contains a definite quantity of human labour, and is in this respect equal to them.

There is, therefore, nothing mystical about the function of gold as money more than there is about the use of mercury as a measure of heat, or iron weights in a greengrocer’s shop. Gold measures value only because itself is valuable, as mercury has a temperature and iron is heavy. As coin gold becomes symbolic and may be replaced by tokens bearing a nominal value only, but said tokens must not diverge in nominal value from the real value of the gold which would otherwise be used. Likewise the amount of depreciation in weight and therefore value which a gold coin is allowed to suffer and yet remain in circulation, is limited by law.

The quantity of gold for which a commodity will exchange we term its price. This price is broadly determined by the commodity’s value, which is liable to fluctuations as the time taken in production varies.

The price, however, does not only reflect these variations. The velocity with which it is disturbed from time to time carries it now above, anon below the actual value of the commodity. On the surface these minor disturbances appear to be caused by supply and demand, and this is indeed so ; but the relations of supply and demand are themselves subject to the changes in labour-time. Assume, for instance, that the time occupied in producing a given quantity of boots is decreased by some new invention or pro­cess, then there will be a tendency to increase the output beyond the power of the market to immediately absorb, followed by a fall in price. The excess of boots remaining unsaleable, pro­duction is restricted till prices rise, probably above the new value, afterwards falling to approximately the correct level, when production, is resumed. The process may be compared with the oscillations produced on a pair of balances when the weight on one side is disturbed. Owing, however, to the continual alteration in the values of commodities due to improved methods of production, prices hardly ever come to rest at an exact coincidence with value. Nevertheless, it must be an approximation of price to value that takes place, for money is under the same necessity to express its value in the form of other commodities as these commodities are to express their value in the form of money. The state­ment that a sovereign is always worth a sovereign teaches us nothing.

Gold as money, then, is a transformed commo­dity. In addition to its own use (mainly luxurious) it has acquired the functions of universal equivalent—equivalent for all other commodities. Alone of all of them it is directly exchangeable for any of them by reason of its fitness to serve at once as a measure of value and a means of exchange or medium of circula­tion. Like all other commodities, it originates in a form of division of labour in which the means of production are private property and the product also; in which, moreover, production is not for direct use but for exchange.

The self-supporting peasant family of the Middle Ages had little use for money. Its various products were consumed by itself. The labour of each member was obviously part of the family’s labour. Consequently products were not exchanged within it but were considered the family property. Long ages before civilisa­tion tribal mankind produced forms of wealth which were used without going through the process of private exchange. They too needed not money.

The existing order of society, in which goods are produced for the market, is not immortal. It has not always existed ; nor will it continue for ever to exist. When the vast means for producing wealth have been converted from private into common property ; when the labour of society becomes consciously organised and its products distributed directly for consumption ; when, in short, Socialism has been established, money will disappear. Labour products will cease to be commodities. Their social character will be obvious at first sight and will need no translation into mystical terms of gold.

As it is at present, when we express the values of commodities, we do but state in a round-about way that they are products of so much social labour, in a word, our products. Money conceals the fact but does not alter it. It is itself a social product which has the power to command social labour. Accumulated in the hands of private individuals it enables them to exploit masses of their fellow men, in short, it becomes capital. Precisely how it does this will form the subject matter of a future article.

Eric Boden

[To be continued.]