Skip to Content

Socialist Economics: 6 - Surplus Value

Capitalism's innermost secret is the production and the accumulation of surplus value. This is sub-divided into Profit, Interest and Rent, and it is the blessed trinity dominating the entire international economic and political structure of the capitalist world. The seed corn of Surplus Value is Labour-power. Labour-power is now a commodity. It is different from all other commodities in that it produces more Value than it takes to reproduce itself. The mental and physical capabilities of human beings are thus appropriated as commodities and set to work to produce other commodities.

Social freedom, despite the high sounding phrases, is nothing less than permission to sell labour power from employer to employer,  who are the only people in a position of purchasing it. And this is taken to be in the natural order of things. It, however, is not nature which produces this strange relation, nor is the social basis of selling labour-power a normal social practice which has existed throughout the history of civilized society. On the contrary, the emergence of the commodity labour-power has been the result of many historical developments of propertied society, culminating in the establishment of the capitalist form of production.

Certain historical conditions are necessary before the product of labour-power can become a commodity, and these historical conditions apply equally to living labour-power itself. These conditions are:—

    That the means of exchange must be developed.

    That the means of production must be privately owned and operated socially.

    That the labourer must be separated from his means of production.

The value of a commodity is determined by the amount of labour which is socially necessary to produce it, and no more than is socially necessary. If the labour time remains constant the Value remains constant. New production methods cut the time required, and consequently reduce the Value. Other factors intervene like increased skill, state of science etc. When mineral deposits for instance, become less accessible so as to increase the labour time socially necessary, this increases the Value. We have a society where homogeneous human labour working within an average social time is expended in producing a huge mass of commodities. At any given period during the life of that society, a definite amount of value is produced.

Exploitation is, therefore, measured in time which is translated into monetary symbols. Time is money — a vulgar description for a most anti-social practice. If a group of workers each work 160 hours monthly for an employer, and the employer makes a profit at the end of 12 months, then where does the profit come from? The raw materials used in the productive processes cannot add to their value, nor can the machinery add to its own value. In fact, it transfers its value to the products as it wears out. Plant and industrial installations are in the same category. Likewise with the bricks and mortar of the factory, steel mill and shipyard. The worker has not been cheated because on average he receives the value of the commodity which he sells to the employer for wages — his labour-power.

Surplus-value is not created by trading transactions, even by cartels or monopolies. A manufacturer may corner a market and grab the lion’s share of the profit to the detriment of other capitalist groups. But no monopoly can create surplus value. In any case, goods have to be produced before they can be sold, and the producing capitalist would expect to make a profit apart from his trading partner’s profit. The only possible explanation left to us is that surplus-value comes from labour-power.

The capitalist buys labour-power in order to use it and puts the seller to work, providing the raw materials, machinery, factories, etc., the subjects of labour power, or the place where the labour process is to be carried on. Labour-power in motion becomes Labour, that is, it becomes congealed in the objects it produces. The capitalist buys labour-power, but he sells labour, and that labour is presented to us as a vast conglomeration of commodities. The value of labour-power and the value of labour are not the same thing. The commodities are sold, and the cycle is repeated. The capitalist buys labour power for money (wages) (M); labour power becomes labour (products, commodities) (C); commodities are sold (money) (M) — M.C.M. But the commodities are sold at their value not at the cost of production. That value is determined by the amount of socially useful labour contained in them. No capitalist sells goods or services at the cost of producing them — he is not in business merely to receive his money back.

Wages represent a certain period of time which the worker contracts to work for the employer, whether it be an hourly or weekly rate, or a monthly salary. He must, at some point, require to produce the value of his own wages. So, if a proportion of the working day is devoted to this purpose, then it becomes necessary for him to labour up to the point where he has in effect produced the value of his own wages. This is necessary labour. It follows that if he continues to work beyond this period of necessary labour he is in effect rendering a certain amount of superfluous labour, or surplus labour. The worker does not own his labour, this is the property of the capitalist. He owns his labour-power; indeed it would be hard to separate it from him as it exists in the form of muscle, brain and nerve, the human organism. He is, therefore, making a gift to his employer for every atom of time he spends in the labour process over and above that necessary to reproduce the value of his wages, which is the necessary labour-time. It is precisely this surplus labour-time which manifests itself in the physical products of labour (values), and this becomes surplus value, an additional quantity for which the capitalist has not paid.

We speak of time only at this juncture, but the workers are supplied, in addition to raw materials, with highly developed machinery and other sophisticated tools of production; the tempo of production is intensified. The greater the degree of production which can be achieved using up-to-date methods and techniques within the same time, or even less time, means that the rate of exploitation is higher, because the necessary labour time will have been reduced and the surplus labour time increased. This is what happens in real life. The TU movement has for years been trying to cut down the workers’ hours, although most Trade Unions have long-term agreements whereby their members work considerable amounts of overtime. The official working week has been reduced in most industries to around 40 hours in 1973, as compared to 52 hours per week in 1900, but even allowing for the additional number of workers in industry, production has increased at least two-fold, and this has been due to the extension of machinery over a whole range of labour processes. It is the capitalist who stands to benefit by this, as he benefits by every advance in science and technology. Whilst wages have risen above prices compared with 1900, the rate of exploitation has increased, and the capitalist class are much better off. Marx put it succinctly : “The bigger the banquet, the bigger the crumbs which fall from the table.”

The capitalists do not arbitrarily fix their profits over their cost of production. They sell the goods for what they think the market will stand, but the starting point is what it costs them. It is, however, the secret of commodities that, when brought to the market, they will exchange with other commodities according to the amount of socially-necessary labour time contained within them, and no capitalist knows this, although he will obviously know the amount of time his process has taken. Value contains surplus-value. The fact that articles do not always sell at their Value — sometimes above sometimes below — does not alter this rule. Buying and selling influence prices — they do not determine them. Profit is not made from trading transactions but from the productive process. The surplus product becomes the surplus value — the surplus value is the social fund from which the profits of all sections of the capitalist class — bankers, landlords and industrialists — are derived.

It is not our concern to take sides in disputes which occur from time to time between sections of the capitalist class on whether landlords’ or bankers’ profits are too high and industrialists’ too low. This is a matter for the Labour Party and the small fry of the Left, who usually side with the industrial capitalist. It is sufficient for our purpose to show where surplus-value comes from and not its final destination. We know it doesn’t go to members of the working class.

Surplus value is produced at the point of production and not during the process of circulation, i.e. banking, insurance and commerce. Whilst it is true to say that only productive workers produce surplus-value, it is equally true to say that all workers are exploited. How would the banking capitalist appropriate his share of the surplus value unless he employed bank clerks, accountants, etc. to appropriate it on his behalf? Where would the landlords get their share without the chartered surveyor, rent-collector and estate agents and clerical staff? How would capitalism function without street cleaners, refuse collectors, health services, and every other service, including police, civil servants and other ancillary workers?

Whilst the basic mechanism shows the original source of surplus-value to be labour-power at the point of production, in fact you cannot separate the main divisions of capital which through custom and the division of labour have historically impressed themselves on the capitalist mode of production — banking capital; industrial capital; landlord capital. Capitalism has to be taken as an organic whole, or an indivisible system. The extraction of surplus-value is a social act, consequently the entire resources of the body politic exist for that one purpose.

Every member of the working class plays a part, either directly or indirectly, and all are therefore exploited.

This is the final article in the present series. They have been based entirely on Marx’s Labour Theory of Value, and were intended purely as an introduction to a more detailed study of the subject of Political Economy and the mammoth contribution by Marx.

Jim D'Arcy