The Economics of Capitalism

(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.


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