Marxism, a Virile "Ghost" (Conclusion) (1933)

From the October 1933 issue of the Socialist Standard

Link to Part 2.

One of the strangest sights that could be brought within the range of human experience is the living existence of that which previous experience had definitely calculated as dead.

But our John O' London's scribe may have the honour of adorning himself with the "Pope's mantle " for having seen that which is “dead" yet it "still liveth." Rising to giddy heights of contradictory ability in his article "Marxism is dead," he "unblushingly" informs his readers that it is still alive.

He says that "the essential truth of the doctrine of surplus value is now almost universally admitted by economists of all schools." What a Journalistic Daniel come to judgment. Now either these economists must be treading the earth uncomfortably burdened with a ghost, or their knowledge of the body's vitality is such as to prove it to be very much alive. We leave Mr. Clifford Sharp, the author of the article in question, to make his choice free of charge. He attempts to 'outline the meaning of surplus value, but his opening statement proves him to be utterly unacquainted with Marx's writings, unless, of course, he merely desires to misrepresent them. He commences with wages. “The price of labour," he says, is normally determined by the “bare cost of subsistence." We will undertake to supply him with a small pamphlet in which it is written that such terms as value or price of labour are senseless terms within the meaning of economic science. The booklet we refer to is "Value, Price and Profit";  the author is Karl Marx. Therein Marx explains that when using the phrases "value or price of labour " he does so only in the popular slang sense of the term. Therefore the statement is not Marxian. Rather is it representative of the classical school of political economy in Adam Smith and David Ricardo. Even the newest student of Marx knows how he criticised these economists on that very point of their theories.

When the capitalist pays wages to the workers he but hands to them the price of their labour-power, and not the price of labour, which is totally different. The distinction is important. "When we speak of capacity for labour," says Marx, "we do not speak of labour, any more than when we speak of capacity for digestion, we speak of digestion, The latter process requires something more than a good stomach. " ("Capital," Vol. 1, page 152.)

If our critic fails to see the difference in question, and thinks it purely theoretical, then many a capitalist will reveal to him the distinction in practice. When the capitalist has his goods or commodities placed on the market for sale, he is in fact offering to prospective buyers things which have labour embodied in them, they are but products of social labour, and have cost him so much money for wages plus other expenses for raw material, etc.

Obviously if the wages paid were the price of the labour contained in these commodities there could not arise any profit to the capitalist.

But the world of capital “do move.” Broadly speaking, wages cover the cost of the things required by the workers to enable them to maintain their energy as producers of wealth. In buying that energy the capitalist buys a commodity much in the same manner as he buys any other as far as its value or price goes. But of all the commodities, the energy of the workers, their labour-power, has the great merit to the capitalist that it produces a greater value than it itself possesses. Labour-power when in useful motion results in products which have labour stored within them. Not the labour of this or that individual, but the labour socially necessary, gives these products their value and finally their price. Between the cost of that labour-power and what the capitalist ultimately realises from the use of labour-power in the form of saleable commodities, arises what is known as Surplus Value.

Our critic thinks the doctrine of surplus value somewhat “crude," in that it ignores the “benefits of cheap luxuries" which arise from the process by which surplus value is gained from the ever-increasing efficiency of production. Ye gods! How the millions of unemployed workers must be revelling in the benefits of “cheap luxuries." We often wondered why they rushed to the labour exchanges on pay-day; now we know. Who knows what capitalism may yet have in store for us? We may yet be able to take the favourite trip down the Mediterranean and generally travel the world for months on end out of even the smallest wage. But we confess to our being quite pessimistic as to the prospects, no matter how cheaply “luxuries" may be produced in the future.

But his handling of Marx's view of the means by which wages are determined provides a precious pearl of political economy. He alleges that according to Marx wages are determined by the “bare cost of subsistence," i.e., the minimum wage or salary which the average worker will accept as an alternative to destitution or the dole. What nonsense, to be sure! Where, may we ask, is to be found in Marx’s writings such a grotesque caricature of economic realities? How much more will the workers want in wages than what amounts to destitution or the dole? A shilling a week, two shillings, or half-a-crown ? The position needs merely stating in this form for its absurdity to become obvious to even the average journalist. The ”bare subsistence” theory of wages is not Marxian at all. Marx’s theory of wages can only be understood when its historical and social factors are fully comprehended. When Marx analysed the economic workings of capitalist society and formulated his findings thereon, he had seen clearly enough the historical background of that society. In point of fact his conception of the evolutionary process in human, society is complementary to his economic theories. Hence with wages alone their historical and social make-up is amply allowed for in Marx’s system. Perhaps the following reference may give an idea of the truth of this statement.

“His natural wants, such as food, clothing, fuel and housing, vary according to the climatic and other physical conditions of his country. On the other hand, the number and extent of his so-called necessary wants, as also the modes of satisfying them, are themselves the product of historical development, and depend therefore to a great extent on the degree of civilisation of a country, more particularly on the conditions under which, and consequently on the habits and degree of comfort in which, the class of free labourers has been formed.” (“Capital,” Vol. 1, page 150.)

Perhaps this may be sufficient to convey to our critic how enormously wide of the mark he is when aiming his shot at the Marxian ”Law” of wages.

We assure him that with space, time and inclination we could make this position on wages much more illuminating, not only to his own type of Marx-critic, but likewise to many who pay mere “homage” to Marx’s work. The theories of Marx are not to be dismissed by a mere article in a half-baked serio-pseudo-scientific journal. If only the tiniest fraction of the time Marx spent in formulating his theories were spent by those who criticise them in an effort to understand them, much that is said against Marxism might never see the light of day.

However, before concluding, there are one or two further points made by our opponent to be touched upon. He says Marx failed to see or foresee ”three very important factors in the development of capitalism.” There are (1) the invention of the Joint Stock Company, by which the ownership of capital was widely distributed amongst all but the very poorest classes, (2) the political power of organised labour, which has led. especially in England, to the steadily increasing comfort and security instead of the increasing misery of the wage-earning class, (3) the development, especially in America, of a very large measure of equal economic opportunity for all classes.

Surely John O' London's Weekly is large enough to contain “facts and figures” to help sustain these unsupported assertions. Why were these not given? We suggest that Mr. Clifford Sharp, even if he had the desire to prove his case, found himself utterly unable to do so. A series of mere assertions hardly merits a detailed reply; they merely call for an explanation of their validity. For our part we summarily dismiss the three statements above as being contrary to the facts. Perhaps Mr. Sharp will oblige with the information to prove how capital is so widely distributed to permit any appreciable number of the workers to be “interested” in Joint Stock Companies. To prove the steadily increasing comfort of the workers when compared with the increasing wealth of the capitalist class, not merely in this country and America, but throughout the world. That reference to the ”political power of organised labour” really wants some beating, for as workers ourselves we haven’t the faintest notion that organised labour has gained such power. However, any criticism of Marxism, to be complete, must take in the “class war” theory. Mr. Sharp does this, but with an equally faulty method of attack. Marx postulated the theory of class struggles, but largely because he saw the class struggle in modern society in operation. That struggle is no more the invention of Marx than the earth’s motion around the sun is the invention of Copernicus. The struggle is patent to all who want to see it. Maybe the working class as a whole do not realise it in theory, but they are made to feel its effects in practice. The essential feature of the struggle is economic, the conflict which inevitably arises through the ownership of the means of life being the property of a class, with its consequent exploitation of those who, without such ownership, are compelled to toil for others in order to live. In its final analysis the struggle resolves itself into a class war in that each class consciously fights to retain or gain mastery of the means of life through political forces. The foregoing has been a factor of historical development throughout historic times, as may be gathered from a study of past history from the time of tribal communism. Here Marx was on ”safe ground,” for his theory of “social revolution.”

But our critic falsifies this position in every way. He says that Marx “did not ask the workers to understand his economic doctrines, he did not even invite them very urgently to arise and throw off their economic bonds.” Marvellous! For we have powerful recollections of Marx writing the slogan, “Workers of the world, unite,” and likewise have noted the extreme care taken by Marx to make his theories rightly understood by the workers. But our opponent merely makes these points as a means of leading up to a further falsification of Marxism. The revolution is alleged to be meant by Marx as a ”catastrophic event ”— ”as something which, when the time was ripe, would happen, as it were, in a single night.” Why the night time should be chosen is not stated, but we presume that, like the celebrated ”bogey man,” ” he likes the dark whose deeds are evil.” We are told that Marx wanted the working class to ”organise itself not in order to seize power by political methods, but in order to be able through its leaders to exercise power when power fell, miraculously, as it were, yet of historic necessity,

into its hands.” Our immediate comment here is that Mr. Sharp must himself be suffering from an acute attack of “ Russianitis.” The Bolshevik bogey of revolution from nowhere must have appeared in his dreams and he has mistaken it for Marx’s idea of social revolution. Thus does he say that, “a Marxian political party has always been something of a contradiction in terms.” But we reply to the contrary. The organisation of the working class for the control of the political machinery is of the very essence of Marxism. Who was it who said that the working class must first of all acquire political supremacy? Marx. Who actually participated in the demand for the extension of the franchise where such had not yet been gained by the workers ? Marx.

"The irony of history,” says Engels, Marx’s great co-worker, ” turns everything upside down. We, the 'revolutionists,' the ‘upsetters,’ we thrive much better with legal than with illegal means in forcing an overthrow. The parties of order, as they call themselves, perish because of the legal conditions set up by themselves.” This certainly sounds like Marxism insisting upon the political organisation of the working class. But to a Marx critic it may mean anything different from what it does actually mean.

It is significant that every attack upon the teachings of Marx should be based upon a fabrication of his writings. But the intellectual bankruptcy of the ruling class becomes more pronounced as time proceeds. They with their hirelings are driven from pillar to post to find a rational defence for their system. But the vital truths of Marxism are as a bulwark against the ablest of capital’s apologists. Their periodic and spasmodic displays of ”learning” in Marx criticism merely leave Marxians to humorously feel like repeating the Biblical incantation of old, "If these be your gods O Israel.”

Robertus.

Concluded.

Analysis of Wealth. III. Exploitation. (1916)

From the August 1916 issue of the Socialist Standard

Link to Part 2.

Just as there are two aspects of a commodity, utility and its exchange-value, so there art two ways of viewing its production, or in other words, the labour process.

At one and the same time the labourer produces a use-value and an exchange-value ; the former by transforming raw material into useful articles, the latter by adding labour thereto.

We have already seen that capital in the process of expansion assumes two forms. Part of it becomes represented by raw material, tools or machinery, etc., the passive factors in wealth production, while the rest is invested in a special commodity, labour-power, the active, value-creating agent. Both these factors are obviously indispensable. Without raw material, etc., the labourer would have nothing in which to embody value ; without the labourer raw material would become useless and valueless. For the only use raw material possesses is to serve as the element of the complete commodity, and its exchange-value only counts in so far as it becomes part of the total value of such complete commodity. Raw material, machinery, etc., lying idle, untouched by labour, rot and rust, and lose their exchange-value along with it.

Hence by transforming them into new commodities the labourer does more than add new value ; he preserves old. In so far as raw material, etc., is so transformed, the labour previously expended upon it counts as part of the total labour necessary in the production of a commodity.

On the other hand, the passive factors in the labour process are incapable of transferring a greater value to the finished product than they already possess. The value of the raw material and machinery does not multiply itself ; it remains constant and is called by Marx constant capital.

In realising the utility of the constant capital the labourer preserves it : that is one aspect of his activities. Let us now turn to his function as the producer of new value.

We have seen in a previous article that the amount of value the labourer adds to the commodity is determined by the length of time he inevitably occupies. Thus in our first example he worked six hours and added a value of three shillings ; in the second instance, by working twelve hours a value of six shillings was produced.

We also saw that the object of the capitalist in purchasing labour-power was to take advantage of its capacity for producing more value than it possessed itself. That in the first case the capitalist realised no surplus-value because the labourer produced no more than the equivalent of his value, but that in the second case the surplus amounted to 3s, the product of the extra six hours labour.

In each of these cases the constant part of capital adds no more than itself to the total value. The amount of the constant capital in the second case is twice that of the first in order that the labourer might work twice as long, but this makes no difference to the result. The new value of 6s. is added by the labourer.

Just as any purchaser seeks to obtain the maximum use-value from his commodity, so the capitalist uses up labour-power to its limit ; seeks to obtain the maximum of value, and therefore of surplus-value, from its exercise. It is the object of the present article to show how this is achieved. One thing must be borne in mind, viz., that the rate of surplus-value is not calculated on the total capital, but only on the part which is expended in the purchase of labour-power. Thus in the above instance, whereas the wages of the labourer were 3s. and the total value produced by him was 6s., the rate of surplus-value was 100 per cent. ; that is to say the surplus was equal to the wages.

When the capitalist speaks of his “rate of profit” he would in this case reckon the 3s. surplus-value in proportion to the total capital advanced, viz., 27s., thus making the rate a little over 11 per cent.

Well as this method may serve him in his conventional dealings, it hides the true extent of the exploitation of labour-power.

We have seen that the capitalist obtains his surplus by prolonging tho labourer’s work beyond the time necessary to reproduce a value equivalent to his wages. It is, therefore, to the capitalist’s interest, to extend the working day as much as possible. The limit in this direction is simply the physical capacity of the labourer.

In order to exert his powers the labourer must have time to eat and sleep and recuperate, but beyond this the capitalist, having purchased these powers, has sole right over their exercise during the period for which he has purchased them. The only difference, in fact, between the wage-labourer and the chattel-slave is that the former sells himself piecemeal, i.e., in periods, while the latter is sold once for life.

It is, of course, possible that the capitalist may use up in one day a greater quantity of labour power than the worker can restore in three (“Capital,” p. 217). In other words, he may use more labour power in a day than he pays for. It is the labourer’s business to claim the price of his commodity, and hence a struggle ensues as to the extent of the working-day.

In sections 5 and 6 of Chap X. (“The Working Day”) Marx shows how the manufacturers succeeded in extending the working day by degrees from the normal day of the Middle Ages to twelve hours in the seventeenth century. Then how, with the introduction of machinery in the eighteenth century, a violent encroachment took place on the remaining leisure of the workers. “All bounds of morals and nature, age and sex, day and night, were broken down” (p. 264).

Men, women, and children were worked to the point of exhaustion, until even the capitalist legislature, threatened by working-class revolt on one hand and the extreme physical and mental deterioration of that class (the source of surplus-value) on the other, were compelled to place legal restraint on private greed by limiting the hours of labour. For years they dallied and toyed with the matter, passing laws and abstaining from granting money for their administration and adopting all manner of devices to render their concessions purely nominal. Only when the most distinguished medical authorities had pointed out the danger to the ruling class of persisting in the industrial murder of children, did this class definitely prescribe that no children under 13 years of age should be worked more than 12 hours in one day. Even then it left, all manner of loopholes for the evasion of the Act (1833), of which the manufacturers, in their blind profit-lust, were not slow to take advantage.

With eloquent thoroughness Marx shows how rival sections of the ruling class exploited the misery of the workers on the political field in order to gain their own ends ; how time and again they betrayed them, and finally only conceded the meagre right of sufficient time in which to eat and sleep after a bitter struggle over every inch of ground for half-a-century.

These passages are indeed enlightening as to the character and methods of our masters, which have changed, if at all, only in the direction of greater duplicity.

The very nature of machinery enables the master class to increase the speed at which their slaves work, thus exhausting them more rapidly and reducing a legally limited working day to nominal value. Hence the workers are under the necessity of continually struggling to obtain still further reductions in the hours of labour. For by so much as the speed at which they work is increased, by so much is their life-time shortened.

Hitherto we have considered only one means of increasing the surplus-value, i.e., the lengthening of the working day. Capital, however, by no means rests content with pushing that to its limit. It is for ever seeking to reduce the value of labour-power and consequently the necessary time spent by the workers in reproducing that value, thus leaving a greater portion of a given working day in which they must produce surplus-value. This result is effected chiefly in two ways.

From the time the capitalist class first assumed control of industry there has gone on an increasing splitting-up of the forces of production among the producers. By concentrating numbers of workers in one workshop the earlier manufacturers were enabled to divide a handicraft into separate parts, each part being taken up by a different worker. Instead of being a skilled craftsman the worker became a mere special cog in a machine, and in this way the time spent in learning his calling was considerably reduced. Another effect of this alteration in the process of production was an increase in the product of a given number of men. The specialisation of individuals economised the time necessary to produce each individual commodity. This resulted in reducing the cost of the articles produced and consequently the maintenance of the labourer. Thus in two ways the exchange-value of labour-power fell ; wages suffered a reduction and the increased product went to the capitalist.

The effects of this division of labour, which Marx defines as Manufacture proper, were insignificant compared with those resulting from the advent of machinery and modern industry. Here the worker loses the last vestige of skill and has his productive capacity enormously increased by being converted into an attendant of a monster which operates not one but many tools at once. The time spent in learning his task now falls to almost nil, while the cost of his necessaries is still further reduced and his wages along with it. Surplus-value increases by leaps and bounds, and since machinery is constantly being improved, more universally and economically adopted, there has as yet been discovered no limit to this increase.

We see, then, that capital grows by securing domination over living labour-power and consuming it to the limit of its capacity. In this process the labourer preserves the constant part of capital, reproduces the equivalent of his wages, and adds a surplus which may be converted into new capital.

Despite various theories concerning the “abstinence” of the capitalist, however, the whole of this surplus-value does not become capital. Quite a considerable portion goes to provide the person of the capitalist with the necessaries, comforts, and luxuries proper to his social status. Still, he does “save” !

What specially interests us here though is that his whole consumption fund, large though it may be, involves no reduction of the amount of his wealth. Even if he consumed the whole of the surplus produced by the labourers he would become no poorer. He would remain a capitalist.

There is, however, another aspect of this relationship. In the course of time the capitalist inevitably spends a sum equivalent to his original capital in his own personal consumption. The capital he has invested therefore becomes practically the creation of the labourer : a sum of accumulated surplus value. If, for instance, the capitalist makes a profit of 20 per cent. per annum and consumes the lot, then in five years he will in effect have consumed the whole of his capital. The sum intact which he still retains is the fruit of his exploitation of labour-power, and it is with this sum that he continues to purchase labour-power.

The reason the labourer offers himself for hire is precisely because he does not possess the means of production. By continually yielding to the capitalist all his product over and above his necessary price, wages, he reproduces his own propertyless condition. Saving by the capitalist, nay, the mere existence of the capitalist, involves the absence of opportunity to save for the worker. The process of exploitation perpetuates itself.

The accumulation of surplus-value, the fruits of the process, simply enables the process to be carried on more extensively. In other words, the workers produce the means for their employment on an ever-increasing scale. Their reward for doing this will be dealt with in a further article.

Eric Boden

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.]

Surplus value. (1911)

From the July 1911 issue of the Socialist Standard

“Commodities are sold at their real values.” Karl Marx

“Good, then,” says our opponent, “since commodities are so exchanged, wherein lies the robbery of which you complain ? The capitalist, in exchange for the commodity labour-power, gives an equivalent value in the shape of money, which the worker can again exchange for any commodity he requires.”

To the casual observer it would appear that there is a contradiction in the Socialist teaching. If the above quoted statements are correct it would seem that the worker does not receive sufficient to satisfy his natural requirements because his labour is not of sufficient value. The question will naturally arise, whence comes the wealth upon which the capitalist lives ? Is it that his labour is of more use to the community, and that consequently he receives more in exchange ? Scarcely, for, as can be readily seen, those who receive the greatest share of the world’s wealth, whatever their ability may be, do not use that ability in production.

The millionaires do nothing in the creation of their bank balances. The capital from which they draw their vast incomes is often invested in concerns they know little about. Maybe the industry in which they are “interested” is in a country they have never visited. The process by which the wealth is obtained is foreign to them, and all that they are concerned with is that the shares purchased by them (or their agents) are of a certain value and are “a good speculation.”

It is possible that the wealthy individual has been instrumental in floating the company in which his money is invested, or he may be familiar with the purchase and sale of “stocks and shares.” He may have amassed his millions in a successful gamble on the Stock Exchange, or in the purchase of a patent or a mine.

But starting a company produces nothing, and a lifetime spent in buying and selling shares, however many thousands it may bring into the pocket of the fortunate speculator, will not raise one atom of metal or a morsel of coal; will not produce an ear of corn or weave a single thread of linen cloth.

In what way, then, does the capitalist obtain vast stores of wealth without producing a fraction of it, while those who seemingly produce all are often without the bare necessaries of existence ?

Before unravelling this tangle, and having shown how the capitalist can obtain wealth without doing anything useful, let us see what the worker does and how he is rewarded.

The proletarian, whether artizan or labourer, seeks a job, the reason being, not that he is particularly fond of the atmosphere of a capitalist factory, mine, or workshop, but that, having nothing to exist upon, he is compelled to get food, clothing, and shelter from those who possess these things.

The worker obtains a situation in a factory, and proceeds to operate some tool or machine, to take part in the production of some commodity. He works for a certain number of hours, and at the expiration of that time is given a sum of money which is called his wage.

He has exchanged his commodity, labour-power, for another commodity, gold. The value of the gold he receives is equivalent to the value of the labour-power expended.

How are these values determined and in what way are these different articles related ?

The value of the gold is determined by the amount of socially necessary labour time required to produce it, and the value of labour-power is determined in exactly the same way.

If, for instance, the time taken to produce an ounce of gold be found equal to the average number of hours required to produce those things necessary for the maintenance of an artizan for the period of one month, then an ounce of gold will be (on the average) the price of one month’s labour-power. In other words his wage will be one ounce of gold (£3 17s.10½d.) per month.

During the period of labour the artizan has expended an amount of energy that can be replaced by the expenditure of £3 17s.10½d. Has he lost anything ? Does not the transaction leave him where he was before ? Let us see.

Were we considering a machine or other inanimate object, we should say : “That which was used has been replaced and there has been a fair exchange.” But the worker is human, and as such does not exist merely to labour. He has occupied the whole of a month either in working or in recuperating. This experience has not been an enjoyable one, and had he consulted his own desires he would have ignored the “hooter” and gone about some other and more enjoyable business. He has lost a week of his life, and in return he has nothing to show. To the ordinary worker one week is as the next, and his whole life, with very few and short periods excepted, is spent in the same way. He has been robbed of all the pleasure and happiness that otherwise he might have enjoyed.

How has the employer fared ? He has taken the worker’s labour-power and given in return just sufficient to replace it. Employer and employed enter into a bargain. The employed does the work and gets nothing ; the employer does nothing and gets—what ?

I have previously stated that the proletarian had to enter the factory in order to obtain the means of life from those who possess those things. The capitalist has capital, and enters into the bargain with that. Where did he get it ? He may have got it as a legacy ; he may have “worked hard and saved it by thrift” ; possibly, very possibly, he “pinched” it, but that does not matter for the moment. He advances sufficient for the labourer to live upon for a certain period, and during that period the latter must work and add value to some article or raw material, the property of the employer.

Now while the capitalist pays the full value for labour-power, that is, its cost of production, he does not give the labourer the value of his labour, namely, what he produces.

Given the present mode of production—scientific method, organised labour, power-driven machinery, etc., the worker can produce in 6 hours sufficient to provide himself and his family with necessaries for a much longer period—for at least 48 hours. If, then, the employer works that individual for 24 hours and gives him in return sufficient to maintain him for 48, he can show a profit amounting to the product of 18 hours labour—three-quarters of the fruits of the labourer’s toil.

That is what we call surplus value—value produced by the workers for which they receive nothing in exchange.

The difference between the labour-power of the worker and all other commodities is that in its consumption it creates a greater value than itself.

Prior to the capitalist system there was surplus labour. The labourer at one time produced for himself and also for his feudal lord. His week was divided into days during which he worked on his own land and days in which he was compelled to work for another, but the division was more clear and he could see that a great portion of his life was spent in work from which he obtained no benefit. Under capitalism, however, it is made to appear that the toiler receives full value for his labour by clouding its real meaning, and giving to the term “labour” the significance that should be applied to the expression “labour power.”

“Those who labour in reality feed both the pensioners (called the rich) and themselves.” Yes, and the “pensioners ” are fed well for doing nothing, while those who labour exist upon the offal and the shoddy.

To abolish the commodity nature of human labour-power is the object of the Socialist, for while the labourer is compelled to sell his commodity in the open market its price will approximate to its cost of production and the working class will be compelled to accept a subsistence while robbed of the comforts of life that they themselves produce.

Twel.

Letter: State surplus (2001)

Letter to the Editors from the June 2001 issue of the Socialist Standard

State surplus

Dear Editors,

Due to a computer problem, I suspect, my letter in the May Socialist Standard read 12 instead of 2. This gave the careful reader the impression that profit represents over 90 percent of surplus value. Perhaps in Karl Marx’s day this might have been true. But not today; that’s for sure.

Why your response to my letter failed to point out that the political state in this age of massive reformism represents the biggest portion of surplus value is noteworthy,. My guess is that it has something to do with clause 6 of your Declaration of Principles and the need of a transition period (not in the Trotskyist sense) in which a good SPGB “dictatorship of the proletariat” would come into power.

If you now are going to openly advocate a dictatorship of the proletariat, then the issue of surplus value is crucial. To shrug it off as “pedantic” and not the important is scary.

Thomas Alpine, 

Grand Rapids, Michigan, USA

Reply: 

You are right that today a large portion (we don’t know about the biggest portion) of surplus value goes to the state via taxes, which all ultimately fall on capitalist employers and other property owners. But we don’t see what this has got to do with us advocating that workers should take political action to establish socialism. Perhaps you mistakenly think that we are advocating some SPGB government that would keep the state in being and still siphon off surplus value from the workers. But there’s no need to be scared. We advocate that the state should be abolished just as soon as socialism (common ownership and democratic control of the means of production) has been established, which can be done very rapidly once a majority has decided that it wants this and organises itself democratically to bring it about. Once this has been done, then the socialist political party (i.e. the working class organised democratically and politically for socialism) will also be disbanded.

Editors.

What is surplus value? (1962)

From the December 1962 issue of the Socialist Standard

If a person who owned a million pounds decided to spend it he could live, without working, for forty years at the level of £25,000 p.a. before being broke. If the million pounds was invested at an average of five per cent. interest p.a. over 40 years, it would enable him to live at the level of £50,000 a year for the same time, and he would still have his million. Who said that you can't cat your cake and still have it?

Surplus value is the sole source of all rent, profit and interest, and the exploitation of the Working Class is the source of all surplus value. Capital is wealth used in the reproduction of wealth in order to extract profit. This is investment of money as distinct from spending it.

In early commodity production the producers were owners of their means of production, raw materials, etc. They owned the articles they made and they sold them. The right of a person to own what his labour created was a recognised principle. Modern capitalism excludes the working class from ownership of the means of production. The worker is compelled to sell his ability to work in order to live. He sells his labour power as distinct from his labour. The value of the commodity labour power is determined by the amount of food, clothing, shelter, etc., required to reproduce the mental and physical energy expended and to reproduce other wage slaves. For example, the value of engineering labour power is approximately 5s. per hour. In working an hour the engineer may produce value exceeding 15s. These social and historical aspects are of great importance.

Money can be transformed into capital, of which there are two aspects. Constant capital consists of machinery, raw materials, and so on; variable capital, in money form, purchases labour power. Labour is the positive or creative factor. In modern society, labour is the source of all wealth. Irrespective of how gigantic, complex and costly the productive machinery may be, it is all a product of labour.

In the productive process, let us assume a capital of £10,000 invested, of which £7,500 is constant and £2,500 variable. We also, for convenience, assume that the total capital is consumed in the process of production, although this in fact rarely happens. If 10,000 articles valued at 25s. each are created, the total product is £12,500, an increase of £2,500 on the original capital. Where does this increase come from? Neither constant nor variable capital can grow or expand. The original value invested can only re-appear, in new form, in the new wealth created If we take one article, value 25s., depreciation of machinery and the raw materials re-appear here at a value of 15s., variable capital at 5s., making a total of 20s. invested by the employer. But he sells at 25s. Labour power is the only commodity which can produce more than it itself consumes. Of course, the worker can't sell his labour, because having sold his ability to work, his labour is his master’s property. The difference between the value of labour power and the value of labour is, therefore, 5s. in this case, surplus value, or unpaid labour.

The manufacturer would argue that the £2,500 is a modest twenty-five per cent profit, a reward for his thrift and directive ability. It is quite true that, considered as a rate of profit, it is 25 per cent. of the original sum invested. However, the increase arises directly out of the variable portion of capital and to determine the extent of the exploitation of the workers we must consider its relation to surplus value.

In our example we have £2,500 wages against £2,500 surplus value; or a 100 per cent, rate of exploitation. In other words, the total variable capital advanced, in this case, represented half of the value of the embodied labour.

Let us now take a producer who owns his means of production, a tailor for example. Let us suppose that be purchases his raw materials, he spins, weaves and tailors the coat. The wear and tear of his machinery together with the raw materials used costs, say £6. His labour power in the process is valued at £7. The total product is £13. His embodied labour is the source of the new wealth— the coat—and this he realises in full in selling the coat for £13. Had he been a wage slave, compelled to sell his labour power, as distinct from his labour he might have received about £3 10s. l0d. wages, or half the value of his labour power. The other half would go into the pocket of his master, as profit, surplus value. When people own their own instrument of production and sell the products of their own labour neither profit nor surplus value arise.

We can also regard this exploiting process from the standpoint of labour time. Workers are employed at a given wage, say £10 per week, for a specified working week of 44 hours. If the rate of exploitation is 100 per cent., then in the first half of the week they produce, in new wealth, value equal to their wages. In the second half a similar quantity is produced. The working week, therefore, includes 22 hours of surplus labour time.

In every process of production capital is expanded and accumulated. The immense mechanism of production today is the outcome of countless generations of unpaid labour, of surplus value. This Marx calls dead labour returning vampire like to suck the blood of living labour. This vast productive equipment, the natural resources and the labour of society, has been the inheritance of the propertied class for hundreds of years and is utilised for their private gain. The inheritance of the producers, the workers, has been continued poverty, in various degrees of severity. The accumulation of capital and the expansion of the means of production, generally speaking, brings greater exploitation to the workers. Capitalism has produced these twins and will always maintain them as long as it lasts.

The Marxian theory of value clearly shows the facts of our economic and social life in modern society. The abolition of capitalism is the sole means by which this state of affairs can be ended, in order to enjoy the fruits of their labour men and women must re-organise society on a Socialist basis. Only on this foundation can the great productive machinery, resources of nature and the labour of society be utilised to full capacity for the benefit of all of mankind. This great social change is possible and practical whenever a majority of workers decide to bring it about.

John Higgins

The tyranny of the wages system (1985-6)

From the Winter 1985-6 issue of the World Socialist

In any form of society wealth is created by the application of human labour-power to nature-given materials. In capitalist society, whether 'private' or state varieties, this fact is concealed by the need to procure capital to furnish machinery and equipment and to pay wages — thus the capitalist apologia that capital and labour are complementary. The relationship is one created by capitalism and, whereas the skills and energies of workers can, if allowed access to natural resources, produce all the goods and services required by human beings, a train-load of money, left over an area where seismographic tests have indicated, say, the presence of oil, will not succeed even in breaking the soil.

Capital, in the form of money, is simply congealed labour, an exchange equivalent of commodities already produced by wage labour. In its constant form (raw materials, buildings, machinery, etc.) it is, similarly, a representation of accumulated labour. It is labour-power that produces all wealth and it is in our role as wealth-producers obliged to sell ourselves on the labour market for a wage or salary that the working class is exploited. We are not, as a class, exploited as consumers or as taxpayers but as producers.

Capitalism's exploitive mechanism is the wages system. We live in a society where the means of life such as food, clothing and shelter have to be purchased with money. For the great majority of people, that money is derived from a wage packet or a salary cheque which they receive from their employer for the sale of their labour-power, their mental or physical ability to contribute to the production of wealth. It is this necessity to sell its labour-power that divides the working class from the minority of capitalists who — whether they choose to work or not — are able to live by profit or by rent or interest. Thus capitalism divides the human family into two distinct and conflicting classes: the capitalist class, which buys labour-power, and the working class, which sells labour-power. Inevitably, as in all transactions between buyer and seller, there is a conflict of interest between these two classes with one trying to sell its labour-power for as much as possible and the other trying to buy it as cheaply as possible.

The source of all wealth, as we have observed, is human labour-power applied to nature-given materials. But the wealth produced, which, under capitalism takes the form of a great aggregation of commodities, does not belong to the class that produces it but, instead, to the class whose claim to ownership of the natural resources and the means of production (themselves the product of past expenditure of labour-power) are enshrined in law and enforced, if necessary, by the coercive power of the state.

The unassailable fact that all wealth is produced by the working class demonstrates that the source of capital accumulation and of the profit, rent and interest that underwrites the affluence, power and privilege of the capitalist class is the surplus of wealth produced over and above what the working class is paid for its labours. This is in accordance with the economic laws of a market economy for though the workers do receive the value of the commodity they sell, their labour-power, nevertheless their exploitation is through the wages system.

What we get for the sale of our labour-power to our employers is a wage or salary that equates to the price currently being paid for our particular type of labour-power. Our ability to work, in capitalist society, is a commodity the price of which is determined by the same factors as govern the price of other commodities. When a particular commodity is in short supply its price tends to rise and, when it is plentiful, its price tends to fall. To say this, however, begs the question: above what does it rise and fall? The answer is its value and that value is determined by its labour cost of production or, in other words, by the amount of socially-necessary labour time required under average conditions of production to produce it from start to finish. It is value that determines the point above and below which prices fluctuate in line with supply and demand.

Since our labour-power is sold on the labour market as a commodity, its value is determined in the same way as any other commodity. In other words, the value of labour-power is determined by the amount of socially-necessary labour required to maintain us as useful, functioning units of production and enable us to provide for the next generation of wage slaves. The value of particular types of labour-power varies, then, in accordance with the amount of training or education that is required to equip workers with certain skills and these greater values are reflected in the inequality of wages.

But labour-power has a unique property: it can create value of greater quantity than the value required in its own production. It is this capacity to create surplus value that lies at the heart of the workers' exploitation and the capitalists' profit. In any given period labour-power can produce wealth greater than the equivalent of the socially-necessary labour required in its own production. Let us say that workers in a particular industry produce a value amounting to double that of the value of their own labour-power. In half of each day they would produce a value equal to the value represented by their wages for a full day. For the second half of each day they would produce a surplus over and above the value they received in the form of wages or salary. This surplus value belongs to their employer and represents his profit, after payment of rent or Interest if the employer has such obligations.

The ratio of labour-power paid for by an employer to that spent by the worker in creating surplus value determines the rate of exploitation of the worker or, as Marx called it, the rate of surplus value. "The rate of surplus value, all other circumstances remaining the same, will depend in the proportion between that part of the working day necessary to reproduce the value of the labouring power and the surplus time performed for the capitalists" (Value, Price and Profit).

This, then, is the seat of capitalist exploitation of the working class. Other conditions, such as the state of the market, the degree of working class organisation in trade unions and, even, the form of capitalist organisation, may affect or influence the rate of exploitation of the worker at particular times but such influences can themselves be cancelled out by market forces. It is the tyranny of the wages system that itself imposes on the working class their slave status. Where the wages-system exists, irrespective of what party holds political power or whether ownership of the wealth-producing machinery is vested in the state or is in private hands, capitalism exists. That is why Marx refused to support the nonsensical slogan of "a fair day's pay for a fair day's work" and urged workers to inscribe instead on their banner "ABOLITION OF THE WAGES SYSTEM".

That is why the World Socialist Movement defines Socialism as a wageless, moneyless and classless society of common ownership and production for use.

Richard Montague

(Ireland)

Labour-Power and Wages (1976)

From the August 1976 issue of the Socialist Standard

The particular form of society in which we live is capitalism which is composed of two classes, defining class as relationship to the means of production. The capitalist class own the means of production, which enables them to exploit the working class and to live luxuriously on the surplus-value the workers produce. The working class have no ownership in the means of production and must therefore, to live, sell the only commodity they possess: : their mental and physical energies, viz., labour-power.

Labour-power is not to be confused with labour; the latter is the function of the former. Labour-power, being a commodity, is subject to the same economic laws as other commodities. The value of any commodity is determined by the amount of socially-necessary labour-time required for its reproduction. In applying this yardstick we shall see that labour-power exists in the living individual: therefore the value of labour-power resolves into the means of subsistence, food, clothing, living accommodation, all the things required to reproduce the labour-power for the employment in which it is engaged. This includes provision for the worker’s family, as his children must replace him in the labour market.

The purely physical means of subsistence required to keep the worker sufficiently supplied with energy to continue in working order is qualified by historical or social elements; these reflect wants arising from developing social conditions, and varying standards of living obtained by workers in different countries. The value of labour-power may therefore vary within certain limits. It may, for example, be increased by the expansion of the social element, or the social element may be brought nearer to the bare means of subsistence just sufficient to keep the worker as exploitable material. Any further reduction, reducing wages beyond the physical element, would result in labour-power failing in normal efficiency.

Wages are the price of labour-power, the expression of its value in terms of money, although price and value are not necessarily identical. Wages therefore may rise above or fall below the value of labour- power, depending on the pressure of capital on one side and the resistance workers are able to put up. A constant struggle takes place as a necessary result of the wages system. The worker must always try to maintain his standard of living, the capitalist will always try to increase his profit.

The value produced in a working day is divided into two parts. The first is that which has to be returned to the worker as wages. The remainder is appropriated by the capitalist class as owners of the means of production, and is called surplus-value. Clearly the one cannot increase without the other decreasing. Also, wages can never rise above the point where the average amount of profit is threatened to any extent. However, it is a mistake to suppose that this conflict of interests constitutes the class struggle. It is one part of the class struggle, a necessary but limited one. The ultimate struggle is over the ownership of the means of production and distribution, and its prosecution requires comprehensive political action.

Failing that, the basic position of the wage-worker remains unaltered. As we have seen, labour-power is a commodity and like other commodities has value. But it is unique among commodities in that by its use, i.e. when the worker produces by applying his energies to natural resources and raw material, he creates value. He not only adds value, but more value than that of his labour-power. It is the difference between what the worker receives as wages, and the total value he produces, that is the source of the capitalist’s profit. The worker must supply the capitalist with surplus-value in order that he may work for his own livelihood.

Socialists ask their fellow members of the working class to look beyond the wages system, to become conscious of the need to move on to an altogether different society. A society where wages would have no place, there would be no wage-working class, and no capitalist to appropriate what is produced. Property society has served its purpose. Socialism will give rise to new social relations corresponding to the ownership of the means of living being in the hands of the world community. The aim should be to abolish the wages system and to replace it by a system where people can freely take the things they require, as they will freely take part in producing them.

P. Young

Cooking the Books: Two questions answered (2024)

The Cooking The Books column from the March 2024 issue of the Socialist Standard

An enquirer from Vietnam has asked us (and others) a couple of questions on Marxian economics. Here they are with our reply.

1. Does the commodity value come mainly from demand, market evaluation and utility, not from labor? (explain labor theory of value v/s marginal value theorem)

A commodity (as a product of labour produced to be sold) does have to be useful to sell but its price is not related to its usefulness. Water, for instance, is more useful than gold but this is not reflected in their respective price. Nor could a commodity’s price be determined solely by the paying demand for it as supply conditions have also to be taken into account. A stable price for a commodity arises when supply and demand are equal, as Marginalist theory notes, but this tells us nothing about what that price will be. For this we need to look at what it costs to produce the commodity.

No capitalist enterprise is going to produce something to sell unless it recovers the commodity’s money cost of production plus a mark-up for profit. The cost of production to a capitalist enterprise is the labour embodied in the materials and machines the enterprise has to buy to produce it and the wages paid to those working at the final stage of its production. These wages, however, represent less labour than the labour the workers add through their work. The part of the added labour that is not paid for – the surplus value – is the source of the capitalist enterprise’s profit.

So, a commodity’s value, reflected in its price, does depend on labour. It is not quite as direct as that, though, as a commodity’s market price will not normally be an exact reflection of its value due to the averaging of the rate of profit (see the answer below to your second question) but it is still related to the labour required to produce it. Gold is more valuable than water because it needs more labour to produce it.

2. Do employers, business owners, corporation boss… (capitalist class) earn money and create profits from their efforts in marketing and managing their companies… (choose market output with great needs), from the difference in value and price of goods (increased due to consumer demand after being marketed by the boss). Therefore, the capitalist class gets rich on its own merit, not through the exploitation of surplus value by the working class (workers) and the workers’ wages are fair for their labor.

No, the source of profits is surplus value created by workers, not necessarily by the workers that a particular capitalist enterprise employs but from that created by the working class as a whole. Capitalist enterprises compete to obtain a share of this in the form of profits on the capital they have invested. Competition has brought about a situation where each capital ends up tending to make the same rate of profit through capital having moved from less profitable to more profitable fields of activity.

Some capitalist enterprises can make more profits than others depending on how astute they are in anticipating trends, cutting costs and marketing their products. To this extent, the actual profits a particular enterprise makes can reflect the knowledge and experience of its managers (these days capitalists themselves don’t normally manage their business themselves) but the source remains surplus value created by the working class. The managers can justly claim that their skills have brought in more profits, but the skill is in capturing a share of surplus value not creating it. The capitalist class as a whole does not get rich from this; in fact could not as there are losers as well as winners — some individual capitalist enterprises get more in this way but at the expense of others.

The Economics of Capitalism - Part 4 (1954)

From the December 1954 issue of the Socialist Standard

(Continued from the November issue.)

Surplus value is the pivot of Capitalism and the theory of surplus value was Marx’s principal contribution to political economy. It solved the problem of the accumulation of wealth in a system in which value is exchanged for value, yet one portion of society gets enormously rich and the other pitifully poor.

We have already seen that commodities exchange at their values, that is, according to the labour required to produce them. The worker also possesses a commodity, his labour-power or physical and mental energy, which he sells to the Capitalist in return for wages. The value of the worker’s labour-power, contained in his brain and muscles, is determined in the same way as the values of other commodities, by the labour time used up in producing it. This may sound strange as labour-power is not an article that can be seen, like a chair or a table. It is the stored-up energy in the human body, and it is only expressed when in action producing something like a chair or a table; it is represented by the finished chair or table. It is not paid for until it has been in operation producing something, and even then only for the time it has been in operation producing.

The worker’s labour-power comes from the food he eats, and he must have clothes to wear and somewhere to sleep in order that this labour-power may be conserved and capable of functioning productively. He must also be able to bring up children to replace him as a producer when he is worn out. The cost of production of labour-power is determined by the cost of the food, clothing, shelter, and so forth, that is necessary to enable the worker to do the particular kind of work required. The value of labour-power is therefore equal to the value of what the worker needs in order to live and bring up a family. The worker sells his labour-power by the week or the month for a sum of money that enables him to buy what he needs in order to live, and in getting these things he gets the full value of his labour-power; value has been exchanged for an equivalent value.

In working for the capitalist the worker produces commodities that, although sold at their values, yet realise a profit for the capitalist, in spite of the fact that the values of the commodities are determined by the quantity of labour required to produce them.

It may be wondered where the profit comes from when all commodities, including the workers labour- power, exchange at their values. The answer to the riddle is a simple one but it is concealed by the buying and selling system. The answer is that the labour-power the worker sells differs from all other commodities in that its “consumption” results in a greater value than itself. Labour-power in action produces more value than the value of the food, clothing, and other tilings upon which its own value is based. If it costs in money, say, £5 to purchase what will keep the worker for a week, then, in the course of that week, he will add value to products far in excess of £5, otherwise he would not be employed. The difference between the £5 the worker gets and the greater value he produces is the source of the capitalists’ profits.

Thus by employing workers the capitalist makes a profit, and, generally speaking, the more workers he employs the more profit he makes. Although the worker is able to get the value of his labour-power the worker is robbed in the course of the productive process because more value is produced by him than he receives in wages. While he is producing commodities the worker is also producing surplus-value for the capitalist.

We have seen that the worker sells his labour-power at its cost of production, the value of his means of subsistence; if half a day’s labour is sufficient to reproduce the value of this labour-power then the value, or price, of a full day’s labouring is equivalent to the value of the product of half a day’s labour. The other half of the day the labourer works for nothing, gives his labour free. Here Marx distinguishes the first half of the day’s work as necessary labour, labour necessary to reproduce the workers’ cost of subsistence, and the second half of the day’s work as surplus labour, or surplus-value. Out of this surplus-value comes rent, interest, profit, taxes, the means to replace worn out means of production, and the means to expand production. After rent, interest, taxes, and the personal needs of the capitalists have been met, as well as any other incidental expenses, the amount of surplus value (previously turned into money) left over is invested in fresh means of production, that is to say, it is converted into capital; it carries on, in ever growing volume, the process of producing value and surplus-value.

Although the term “capital” is applied to instruments of production of all kinds, these instruments only become capital under special conditions; these conditions are that they shall be employed for the purpose of producing commodities whose sale will realise a profit to their owners. A machine is not capital just because it is a machine; it only becomes capital under social conditions where it is used to extract surplus value from the worker. All modern productive processes commence with the investment of money; it has even become a general conviction, in spite of the contrary evidence of history, that there cannot be any production without money ; yet money is only a link between the production and consumption of articles and only exists in social systems where there is buying and selling, and even there, is limited to those articles that are bought and sold, commodities.

The capitalist buys buildings, machinery, raw materials and labour-power, and then the production of commodities commences. Thus originally all capital is money; it is money invested for the purpose of profit. In the finished commodity the value of the buildings, machinery, and raw materials is passed over intact, and for this reason Marx calls the capital invested in these things “constant capital.” Thus if the total value of these three items over a period amounts to say £20,000 then the finished articles during the period will only contain £20,000 worth of buildings, machinery, and raw material. Of course, in practice, buildings and machinery only give up their values piecemeal; for example, a machine that wears out in five years gives up, or passes over, to the yearly product one fifth of its value each year. With labour-power the position is entirely different. The worker carries over the value of the constant capital to the product and also adds fresh value, the quantity of which is determined by the amount of time he takes to produce the commodity; Marx defines capital invested in labour-power, wages, as “variable capital,” because the quantity of value it adds varies according to a number of conditions.

We have already shown that the wages the worker receives in return for his labouring are not the equivalent of the fresh value he adds to the commodity, but a much lower figure than this. The peculiarity of labour-power, and the secret of the accumulation of capital, is that labour-power in action produces a greater value than it itself possesses. The value of the finished commodity, then, is equal to the values of the buildings, machinery, raw materials, and labour-power plus the surplus above the value of labour-power.

This surplus-value is the portion out of which the capitalist gets his profit, and which enables him to go on expanding production; the greater the relative portion of surplus-value he extracts from the worker, the greater the capacity of capital to expand. It is the real reason for the existence of capital. The greater the expansion of production then, generally, the greater the number of workers the capitalist employs, and the larger grows the absolute quantity of surplus-value. It is only out of the workers’ labouring that the capitalist grows rich and capital accumulates. Hence between capitalist and worker there is an antagonism of interest; the capitalist tries to increase the relative quantity of surplus-value extracted from the labour of each worker, while the worker tries to diminish it by increasing the price he receives for his labour-power. The capitalist, owing to an increase in the productiveness of labour, may get more this year than last and yet pay the worker higher wages, still the relative portion of the total production taken by the worker, as represented by his wages, is smaller. The increase in the worker’s wages has not kept pace with his increasing productivity; he is more exploited now than he used to be.

The aim of the capitalist is to accumulate capital on an ever-increasing scale; for this purpose there must be a corresponding expansion of the market for commodities; the thirst for markets becomes unquenchable and a source of conflict between national groups. In their feverish and insane scramble to get rich, money is invested in productive undertakings that periodically glut the markets; masses of commodities remain unsold and crises develop that ruin investors and put workers out of work, progressively reducing the buyers and accentuating the crisis. Commodities, for which starving and ill-clad people are badly in need, deteriorate or are destroyed. The effects of crises eventually slow down production until the commodities that are stopping up the pores of circulation trickle away; then production is once more stepped up and the way is prepared for another crisis. Periodical crises and unemployment are two problems the capitalist has been trying to solve for over a hundred years but both problems continue to exist. They are not solvable under Capitalism; they are rooted in the system of private production for an unpredictable market. A considerable influence on the production of crises is the introduction of labour-saving machinery and methods. As we have already shown the source of profit is the exploitation of the worker and hence the capitalist aims at increasing this exploitation as much as possible by getting a larger product with a smaller expenditure in wages; mass production methods is an instance of this, demanding huge productive units employing a relatively small number of workers turning out commodities in bewildering quantities. But it must be remembered that profit only comes out of the worker’s unpaid labour, and therefore, there is a limit to how far the capitalist can go in dispensing with workers.

The rate of profit on capital invested does not indicate the extent of the surplus-value produced by the worker. The rate of profit and the rate of exploitation, that is, the rate of surplus-value, are quite distinct. If a capitalist invests say £20,000 in a year as constant capital (machinery, raw materials, etc.), and £5,000 as variable capital (wages) and the value of the year’s product is £30,000; then the profit on the total capital invested is £5,000, that is 20 per cent. The capital invested in wages, however, is only £5,000, for which a value of £10,000 has been freshly produced (the £20,000 constant capital has been incorporated in the product unchanged). The rate of exploitation is £5,000 beyond the £5,000 invested in wages, that is 100 per cent. Thus, if the enormous increase in the quantity of capital that has to be invested in buildings, machinery, and raw materials now-a-days caused a fall in the rate of profit, it would go hand in handed with an increase in the rate of exploitation. In other words the legalised robbery of the workers grows. In fact, the rate of profit does not fall.

What we have put forward in these articles is only an outline of some of the ideas contained in Marx’s Capital. Numerous professors of political economy have attacked these ideas, in spite of which the main propositions still hold the field, 80 years after the book was published.

Gilmac.

The Questions They Ask (1978)

From the November 1978 issue of the Socialist Standard

Questioner: Mr. Speaker, would you please explain ‘Surplus Value’?

Speaker: Surplus Value is unpaid labour. It is work the worker NEVER gets paid for. How can that be? Quite simply. Workers today produce much more value than is required to maintain themselves and family. Let’s say a person works 40 hours a week, 5 days — 8 hours a day. Right. Now, 4 of those hours are the value of their wages, 4 of them go straight to the capitalist, as the sole source of profit. This has all been worked out in typical, rather long-winded German professorial fashion by Marx ("Capital” page 216; Kerr edition), using actual figures of the accounts of the cotton mill managed by his friend Engels. (And he should have known, being a successful mill manager on a salary and 10% of the profits), Marx therefore divided the day into “Necessary” and ‘Surplus” Labour. Necessary — for the worker, “Surplus” — for the Company.

Some people think that Surplus Value is the same as Profit, including some ignorant Trade Union leaders. It is NOT — Surplus Value is the ration of unpaid to paid labour — 4 to 4, or 5 to 3 hours, etc. Profit is what the firm has left, after paying everything: wages, rent, raw materials, taxes, and so on. So what with the investment of £100, Surplus Value could be 100%, i.e. 50 to 50, but profit only 10% — 90 to 10.

Next question . . .

Horatio