125 years ago, on March 14th 1883, Karl Marx died. Marx was a revolutionary above all else. His most celebrated scientific discovery explains how the working class is exploited under capitalism.
Where does profit come from? This is the central mystery of economics, a mystery that was solved by Marx in his most famous work, Capital.
For Adam Smith, capitalism was ‘natural’ because it corresponded to "the propensity to truck, barter and exchange one thing for another". Under the terms of Smith’s ‘barter’, we have buyers and sellers including those who buy and sell labour, apparently as equal partners in exchange: ‘You, the worker, do not have to sell your labour to me and I, the capitalist, do not have to buy it from you’.
As this is a kind of free-for-all, where the division of society into classes is coincidental, those who manage to clamber above the murky swamp to make their fortunes do so, or so we are advised, due to thrift and a nose for a good bargain – rather than to any unequal terms on which buyers and sellers may meet.
In this market place, ‘Old Moneybags’ (as Marx was fond of calling the capitalist), will shop around, like any other buyer, before advancing money to purchase commodities, let us say a work-shop and tools, and contracts workers to repair faulty computer hardware. This process produces the finished commodity and, on selling it, the capitalist realises an amount greater than his initial outlay, which he pockets. This latter is surplus value.
For Marx’s predecessors, profit appeared to be the residue, the difference between what was spent and what remained. For instance, in Smith’s Wealth of Nations (1776) we read:
“The value which the workmen add to the materials…resolves itself…into two parts, of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced.”
But this does not explain the origin of those profits. Ricardo got closer, recognising the contribution of labour in determining the value of a commodity, in his Principles of Political Economy (1817):
“the value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labour which is necessary for its production.”
Ricardo
Again, however, Ricardo does not explain the emergence of profit (see Capital I for Marx’s criticism of Ricardo’s analysis), so the questions remained: if the ‘value of a commodity… depends on the relative quantity of labour’ as Ricardo puts it, what determines the relative quantity of labour? And how can a worker sell his commodity, labour, which has a use value and a price like all other commodities, and receive the full exchange-value for it in the form of wages, yet produce a surplus from which ‘Moneybags’ lives? How can the worker not be cheated, apparently, yet exploited?
The exchange-value of labour is determined by what it costs – in terms of food, housing, etc – to make itself readily available for work. For Marx, "the value of any article is the amount of labour socially necessary, or the labour-time socially necessary for its production" . It is labour (or rather labour power), which transforms raw materials into exchangeable commodities by investing them with the creative value of labour:
A use-value, or useful article…..has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article. The quantity of labour, however, is measured by its duration, and labour-time in its turn finds its standard in weeks, days, and hours.
As socially necessary labour time is measured by its duration, we can equate the exchange-value of one commodity with that of another. Marx equates a quarter of corn with x cwt of iron, but we could equally compare the latest in wireless laptops with a pork pie. What they have in common is the labour invested in producing both. Nor, by equating the exchange-value of a commodity, does Marx ignore the importance of its use-value: "Wheat is nourishing not because it is capital but because it is wheat". Marx is simply stressing that two different commodities share a common property in labour time.
This, however, draws an objection. Surely, the skills of an experienced pig-farmer attract a higher value per day than that of an assistant who stacks black-pudding on a supermarket shelf, even if both do input the same amount of hours? Both do engage in "qualitatively different productive activities", but this does not challenge Marx’s theory: "skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour".
The worker sells "a temporary disposition over his labouring capacity" (Grundrisse)
Labour power
The capitalist purchases a particular number of hours of control and disposition over this, a worker’s value-adding power. The worker, in fact, does not have labour to sell, because realised labour, that is, labour which is not labour power, is only available in the finished product. It is because it is labour-power which he sells that it can be renewed again and again; realised labour, on the other hand, is spent.
This scrutiny of labour and labour-power is not simply a quibble over labels, but one of profound significance since, with ‘labour power’, as Engels explains in his preface to Marx’s 1849 pamphlet Wage Labour and Capital, Marx broke through the stalemate reached by the political economists who recognised the contribution of labour in the value of a commodity, without deducing the source of surplus-value.
This surrender of control Marx calls exploitation. Exploitation is measurable, but not in the discrepancy between the income of workers and capitalists; these variables measure only the disproportion between wages and profits. Exploitation is the difference between the value of labour-power, for which the capitalist pays in order to use for a given time, and the greater value which that same labour-power creates during that time.
Exploitation, therefore, is disguised by the wage form itself, because it appears that the capitalist pays, not for labour-power, but for labour: the inequality of the exchange is falsely disguised as an equal exchange. The notion, therefore, of a fair day’s work for a fair day’s pay only appears to be an equivalent; it is, in reality, illusory:
"He [the capitalist] has to obtain more value than he gives. Looked at from the capitalists’ side, the exchange must only be apparent".
Surplus
Marxists are occasionally asked to justify the ‘scientific’ status of socialism, and a minimum prerequisite of any such work is that it penetrates appearances in order to reveal reality:
"a scientific analysis of competition is not possible before we have a conception of the inner nature of capital, just as the apparent motions of the heavenly bodies are not intelligible to any but him, who is acquainted with their real motions, motions which are not directly perceptible by the senses".
In Grundrisse, Marx unscrews the lid off capital to reveal its inner workings. If a day’s work is needed to keep a worker alive for a day, no capital could be realised because only a simple exchange of labour for wages is required. But if "only half a working day is necessary in order to keep one worker alive one whole day, then the surplus value of the product is self-evident, because the capitalist has paid the price of only half a working day but has obtained a whole day objectified in the product; thus has exchanged nothing for the second half of the work day…Surplus value in general is value in excess of the equivalent…The matter can also be expressed in this way: if the worker needs only half a working day in order to live a whole day, then, in order to keep alive as a worker, he needs to work only half a day. The second half of the labour day is forced labour; surplus labour. What appears as surplus value on capital’s side appears identically on the worker’s side as surplus labour in excess of his requirements as worker, hence in excess of his immediate requirements for keeping himself alive. The great historic quality of capital is to create this surplus value…"
Put simply, by half-time the capitalist needs to extract surplus-value in order to pay the worker; in the second-half, he extracts surplus-value for himself and his investors. This explains Marx’s distinction between necessary labour time – that which "produces an equivalent for the value paid by the capitalist for his [the worker’s] labour-power" – and surplus labour time, that is, when the worker creates surplus-value which, for the capitalist, has all the charms of a creation out of nothing.
Malthus, the English economist, began with "the inevitable laws of nature…a society divided into a class of proprietors and a class of labourers" while, Marx, who had his own views on nature, including human nature, proceeds from a materialist conception of history, that is, a recognition of "the specific differences of epochs of history by class relations established between those who produce and those who appropriate the surplus" Productive activity is not the same in Britain as it is in, say, Morocco, while production processes in steam-loom Manchester have advanced somewhat. As Engels wrote:
“Political economy, therefore, cannot be the same for all countries and for all historical epochs………Anyone who attempted to bring the political economy of Tierra del Fuego under the same laws as are operative in present-day England would obviously produce nothing but the most banal commonplaces. Political economy is therefore essentially a historical science.”
(Engels – Anti-Duhring)
Contrary, therefore, to Malthus, these are not ‘natural’ laws, but are historic and characteristic of the capitalist form of production. And capitalism can and will be abolished.
