7.
Marx’s Theory of Surplus Value
Marx himself considered his
theory of surplus-value his most important contribution to the
progress of economic analysis (Marx, letter to Engels of 24
August 1867). It is through this theory that the wide scope of
his sociological and historical thought enables him
simultaneously to place the capitalist mode of production in his
historical context, and to find the root of its inner economic
contradictions and its laws of motion in the specific relations
of production on which it is based.
As said before, Marx’s theory
of classes is based on the recognition that in each class
society, part of society (the ruling class) appropriates the
social surplus product. But that surplus product can take three
essentially different forms (or a combination of them). It can
take the form of straightforward unpaid surplus labour, as in
the slave mode of production, early feudalism or some sectors of
the Asiatic mode of production (unpaid corvée labour
for the Empire). It can take the form of goods appropriated by
the ruling class in the form of use-values pure and simple (the
products of surplus labour), as under feudalism when feudal rent
is paid in a certain amount of produce (produce rent) or in its
more modern remnants, such as sharecropping. And it can take a
money form, like money-rent in the final phases of feudalism,
and capitalist profits. Surplus-value is essentially just that:
the money form of the social surplus product or, what
amounts to the same, the money product of surplus labour. It has
therefore a common root with all other forms of surplus product:
unpaid labour.
This means that Marx’s theory
of surplus-value is basically a deduction (or residual)
theory of the ruling classes’ income. The whole
social product (the net national income) is produced in the
course of the process of production, exactly as the whole crop
is harvested by the peasants. What happens on the market (or
through appropriation of the produce) is a distribution (or
redistribution) of what already has been created. The surplus
product, and therefore also its money form, surplus-value, is
the residual of that new (net) social product (income) which
remains after the producing classes have received their
compensation (under capitalism: their wages). This
‘deduction’ theory of the ruling classes’ income is thus ipso
factor an exploitation theory. Not in the ethical sense of
the word – although Marx and Engels obviously manifested a lot
of understandable moral indignation at the fate of all the
exploited throughout history, and especially at the fate of the
modern proletariat – but in the economic one. The income of
the ruling classes can always be reduced in the final analysis
to the product of unpaid labour: that is the heart of Marx’s
theory of exploitation.
That is also the reason why
Marx attached so much importance to treating surplus-value
as a general category, over and above profits (themselves
subdivided into industrial profits, bank profits, commercial
profits etc.), interest and rent, which are all part of the
total surplus product produced by wage labour. It is this
general category which explains both the existence (the common
interest) of the ruling class (all those who live off surplus
value), and the origins of the class struggle under capitalism.
Marx likewise laid bare the
economic mechanism through which surplus-value originates. At
the basis of that economic mechanism is a huge social upheaval
which started in Western Europe in the 15th century and slowly
spread over the rest of the continent and all other continents
(in many so-called underdeveloped countries, it is still going
on to this day).
Through many concomitant
economic (including technical), social, political and cultural
transformations, the mass of the direct producers, essentially
peasants and handicraftsmen, are separated from their means of
production and cut off from free access to the land. They are
therefore unable to produce their livelihood on their own
account. In order to keep themselves and their families alive,
they have to hire out their arms, their muscles and their
brains, to the owners of the means of production (including
land). If and when these owners have enough money capital at
their disposal to buy raw materials and pay wages, they can
start to organise production on a capitalist basis, using wage
labour to transform the raw materials which they buy, with the
tools they own, into finished products which they then
automatically own too.
The capitalist mode of
production thus presupposes that the producers’ labour
power has become a commodity. Like all other commodities,
the commodity labour power has an exchange value and a use
value. The exchange value of labour power, like the exchange
value of all other commodities, is the amount of socially
necessary labour embodied in it, i.e. its reproduction costs.
This means concretely the value of all the consumer goods and
services necessary for a labourer to work day after day, week
after week, month after month, at approximately the same level
of intensity, and for the members of the labouring classes to
remain approximately stable in number and skill (i.e. for a
certain number of working-class children to be fed, kept and
schooled, so as to replace their parents when they are unable to
work any more, or die). But the use value of the commodity
labour power is precisely its capacity to create new value,
including its potential to create more value than its own
reproduction costs. Surplus-value is but that difference between
the total new value created by the commodity labour power, and
its own value, its own reproduction costs. The whole marxian
theory of surplus-value is therefore based upon that subtle
distinction between ‘labour power’ and ‘labour’ (or
value). But there is nothing ‘metaphysical’ about this
distinction. It is simply an explanation (demystification) of a
process which occurs daily in millions of cases.
The capitalist does not buy the
worker’s ‘labour’. If he did that there would be obvious
theft, for the worker’s wage is obviously smaller than the
total value he adds to that of the raw materials in the course
of the process of production. No: the capitalist buys ‘labour
power’, and often (not always of course) he buys it at its justum
pretium, at its real value. So he feels unjustly accused
when he is said to have caused a ‘dishonest’ operation. The
worker is victim not of vulgar theft but of a social set-up
which condemns him first to transform his productive capacity
into a commodity, then to sell that labour power on a specific
market (the labour market) characterised by institutional
inequality, and finally to content himself with the market price
he can get for that commodity, irrespective of whether the new
value he creates during the process of production exceeds that
market price (his wage) by a small amount, a large amount, or an
enormous amount.
The labour power the capitalist
has bought ‘adds value’ to that of the used-up raw materials
and tools (machinery, buildings etc.). If, and until that point
of time, this added value is inferior or equal to the workers’
wages, surplus-value cannot originate. But in that case, the
capitalist has obviously no interest in hiring wage labour. He
only hires it because that wage labour has the quality (the use
value) to add to the raw materials’ value more than its own
value (i.e. its own wages). This ‘additional added value’
(the difference between total ‘value added’ and wages) is
precisely surplus-value. Its emergence from the process of
production is the precondition for the capitalists’ hiring
workers, for the existence of the capitalist mode of production.
The institutional inequality
existing on the labour market (masked for liberal economists,
sociologists and moral philosophers alike by juridical equality)
arises from the very fact that the capitalist mode of production
is based upon generalised commodity production, generalised
market economy. This implies that a propertyless labourer, who
owns no capital, who has no reserves of larger sums of money but
who has to buy his food and clothes, pay his rent and even
elementary public transportation for journeying between home and
workplace, in a continuous way in exchange of money, is
under the economic compulsion to sell the only
commodity he possesses, to wit his labour power, also on a
continuous basis. He cannot withdraw from the labour market
until the wages go up. He cannot wait.
But the capitalist, who has
money reserves, can temporarily withdraw from the labour market.
He can lay his workers off, can even close or sell his
enterprise and wait a couple of years before starting again in
business. The institutional differences makes price
determination of the labour market a game with loaded dice,
heavily biased against the working class. One just has to
imagine a social set-up in which each citizen would be
guaranteed an annual minimum income by the community,
irrespective of whether he is employed or not, to understand
that ‘wage determination’ under these circumstances would be
quite different from what it is under capitalism. In such a
set-up the individual would really have the economic choice
whether to sell his labour power to another person (or a firm)
or not. Under capitalism, he has no choice. His is forced by
economic compulsion to go through that sale, practically at any
price.
The economic function and
importance of trade unions for the wage-earners also clearly
arises from that elementary analysis. For it is precisely the
workers’ ‘combination’ and their assembling a collective
resistance fund (what was called by the first French unions caisses
de résistance, ‘reserve deposits’) which enables them,
for example through a strike, to withdraw the supply of labour
power temporarily from the market so as to stop a downward trend
of wages or induce a wage increase. There is nothing
‘unjust’ in such a temporary withdrawal of the supply of
labour power, as there are constant withdrawals of demand for
labour power by the capitalists, sometimes on a huge scale never
equalled by strikes. Through the functioning of strong labour
unions, the working class tries to correct, albeit partially and
modestly, the institutional inequality on the labour market of
which it is a victim, without ever being able to neutralise it
durably or completely.
It cannot neutralise it durably
because in the very way in which capitalism functions there is a
powerful built-in corrective in favour of capital: the
inevitable emergence of an industrial reserve army of labour.
There are three key sources for that reserve army: the mass of
precapitalist producers and self-employed (independent peasants,
handicraftsmen, trades-people, professional people, small and
medium-sized capitalists); the mass of housewives (and to a
lesser extent, children); the mass of the wage-earners
themselves, who potentially can be thrown out of employment.
The first two sources have to
be visualised not only in each capitalist country seen
separately but on a world scale, through the operations of
international migration. They are still unlimited to a great
extent, although the number of wage-earners the world over
(including agricultural wage labourers) has already passed the
one billion mark. As the third source, while it is obviously not
unlimited (if wage labour would disappear altogether, if all
wage labourers would be fired, surplus-value production would
disappear too; that is why ‘total robotism’ is impossible
under capitalism), its reserves are enormous, precisely in
tandem with the enormous growth of the absolute number of wage
earners.
The fluctuations of the
industrial reserve army are determined both by the business
cycle and by long-term trends of capital accumulation. Rapidly
increasing capital accumulation attracts wage labour on a
massive scale, including through international migration.
Likewise, deceleration, stagnation or even decline of capital
accumulation inflates the reserve army of labour. There is thus
an upper limit to wage increases, when profits (realised profits
and expected profits) are ‘excessively’ reduced in the eyes
of the capitalists, which triggers off such decelerated,
stagnating or declining capital accumulation, thereby decreasing
employment and wages, till a ‘reasonable’ level of profits
is restored. This process does not correspond to any ‘natural
economic law’ (or necessity), nor does it correspond to any
‘immanent justice’. It just expresses the inner logic of the
capitalist mode of production, which is geared to
profit. Other forms of economic organisation could function,
have functioned and are functioning on the basis of other
logics, which do not lead to periodic massive unemployment. On
the contrary, a socialist would say – and Marx certainly
thought so – that the capitalist system is an ‘unjust’, or
better stated ‘alienating’, ‘inhuman’ social system,
precisely because it cannot function without periodically
reducing employment and the satisfaction of elementary needs for
tens of millions of human beings.
Marx’s theory of
surplus-value is therefore closely intertwined with a theory
of wages which is far away from Malthus’s, Ricardo’s or
the early socialists’ (like Ferdinand Lassalle’s) ‘iron
law of wages’, in which wages tend to fluctuate around the
physiological minimum. That crude theory of ‘absolute
pauperisation’ of the working class under capitalism,
attributed to Marx by many authors (Popper, 1945, et al.), is
not Marx’s at all, as many contemporary authors have
convincingly demonstrated (see among others Rosdolsky, 1968).
Such an ‘iron law of wages’ is essentially a demographic
one, in which birth rates and the frequency of marriages
determine the fluctuation of employment and unemployment and
thereby the level of wages.
The logical and empirical
inconsistencies of such a theory are obvious. Let it be
sufficient to point out that while fluctuations in the supply of
wage-labourers are considered essential, fluctuations in the
demand for labour power are left out of the analysis. It is
certainly a paradox that the staunch opponent of capitalism,
Karl Marx, pointed out as early as in the middle of the 19th
century the potential for wage increases under capitalism, even
though not unlimited in time and space. Marx also stressed the
fact that for each capitalist, wage increases of other
capitalists’ workers are considered increases of potential
purchasing power, not increases in costs.
Marx distinguishes two parts in
the workers’ wage, two elements of reproduction costs of the
commodity labour power. One is purely physiological, and can be
expressed in calories and energy quanta; this is the bottom
below which the wage cannot fall without destroying slowly
rapidly the workers’ labour capacity. The second one is
historical-moral, as Marx calls it, and consists of those
additional goods and services which a shift in the class
relationship of forces, such as a victorious class struggle,
enables the working class to incorporate into the average wage,
the socially necessary (recognised) reproduction costs of the
commodity labour power (e.g. holidays after the French general
strike of June 1936). This part of the wage is essentially
flexible. It will differ from country to country, continent to
continent and from epoch to epoch, according to many variables.
But it has the upper limit indicated above: the ceiling from
which profits threaten to disappear, or to become insufficient
in the eyes of the capitalists, who then go on an ‘investment
strike’.
So Marx’s theory of wages is
essentially an accumulation-of-capital theory of wages
which sends us back to what Marx considered the first ‘law of
motion’ of the capitalist mode of production: the compulsion
for the capitalists to step up constantly the rate of capital
accumulation.
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