#surplus value

Marx’s theory of value (re divergence of value from price) explains the foundation of surplus profit, which is significantly related to the unprecedented wealth of contemporary moguls, and its association with technological advancements/ increased productivity— eg in industrial production, specifically improvements in machinery, more productive factories. With related technological improvements, more productive units become the measure of price (exchange value). But these technological improvements are not instantaneous — eg because all branches of production are not the same. Thus there are varying degrees of productivity. And the least productive initially influences market price/ exchange value. Hence surplus profits for higher productivity, while market price fluctuates above market value. However, after a certain point, surplus profits “equalize” with average profits via competition, market price gravitates closer to market value, and the rate of profit becomes the same for capitals across the board. Again.. this presupposes that re- production of means of subsistence/ labor/ society is determined by production of surplus value (profits / rent) and the “law of market value”.

Finally, Marx’s examination of surplus profit notes how the law of market value creates a “false social value”, based on exchange value instead of value, that exploits society in terms of consumption/ consumers. For me, this offers an important theoretical foundation for organizing exploited workers at the point of consumption in addition to organizing at the point of production. And not only against capitalist producers but against the landlords as well; particularly with present, even more exorbitant rents and related surplus profits.

More directly bearing on Marx on “Value” below ..

Bringing clarity to my earlier posts re differences between value vs exchange value and surplus value, Marx’s analysis of surplus profits in industry and agriculture by those who first introduce advances in technology explains how the market price/ exchange value of early capitalist production (unconsciously) deviates from the value of these commodities based on labor time — with surplus profits initially forming the basis of the capitalist class system and existence of capitalists/ landlords. As Marx notes, with the abolition of capitalism — and, indeed, abolition of any system based on exchange of commodities — products of labor would be produced and distributed (consciously/ planned) according to their use value. I feel this further confirms the end of the historical presence of value through communism and the abolition of exchange — as suggested by Marx.

Offering up a bit more fodder for discussion and possibly, for some, perhaps elucidation — as I’m now on page 235 in my copy of Rosdolsky’s discussion of “Capital”..!

The fundamental point in Marx’s discussion of surplus value is that it is a function of the amount of labor power expended by the worker beyond that which is necessary for production of means of subsistence. Thus expenditure of labor power for 1 working day can create commodities with a higher exchange value than the labor time necessary to sustain a worker for that one day. Albeit, it need not — and in capitalist society, must not — require working the entire work day to produce means of subsistence. It’s necessary that some part of the day goes to producing surplus value .. ie more than is necessary for reproduction of labor (capital, profit etc). “As long as the worker merely produces an equivalent for the value of his own labor power, “he only replaces the money advanced by the capitalist and spent by the worker on means of subsistence.” (p. 217). But capitalism requires “he work over and above that which he would have to work in order to reproduce his wages “ (p. 219).

For example.. if the work day is 8 hours long, and the labor time required to produce means of subsistence is 4 hours, and the money form/ universal equivalent of value of 1 hour of labor time is $15, then necessary labor time = surplus labor time (the ratio of necessary labor to surplus labor is 1:1), the rate of the surplus value of capital is 100%, and 1 worker will produce $60 worth of surplus value throughout 1 working day. Further, if the capitalist employs 100 workers, then $6,000 of surplus value is produced every working day.

Of course, it is possible to increase surplus value — without increasing prices or wages… ie by lengthening the workday. Obviously, there are physical/ natural limits to how far the work day can be stretched. And beyond this, social and historical limits, eg, such as establishment of a “normal” work day. Moreover, if the absolute length of the working day is a constant, surplus value can still be increased by reducing the part of the working day that is necessary for production of means of subsistence; ie, surplus labor time can be increased by diminishing necessary labor time (p. 224).

The most fundamental feature of capitalism is the way in which it increases surplus labor by reducing necessary labor by promoting development of means of production (p. 225)… bringing lots of workers together in a factory to perform their labor in cooperation, eventually moving from simple cooperation into manufacture and then modern machinery. But Rosdolsky elaborates further on this in chapter 17 (p. 235).

This brings us back to the secret of Marx’s (small) book “Capital”. And I am all agreed with Rosdolsky, who again is so well-stated:

“Therefore the only value which is actually produced in the production process “is added by the new amount of labor. This value, however, consists of necessary labor, which reproduces wages… and of surplus labor, hence surplus value above and beyond necessary labor”. Thus the secret of capitalist “money-making” is resolved by the fact that the wage laborer, who owns none of the means of production, is compelled to work beyond the time necessary for the maintenance of his life — that he can live at all, if he simultaneously sacrifices a part of his life to capital… “Where capital rules (just as where there is slavery and serfdom or bondage of any sort), the worker’s absolute labor time is posited for him as a condition of being allowed to work necessary labor time, i.e. of being allowed to realize the labor time necessary for the maintenance of his labor capacity in use values for himself”. (pp. 220-221).

My most recent thoughts on “value” and “capital” in Marx; admittedly, maybe needs some further clarification… and by no means “closes the case”.. But I think I can support my understanding:

Quickly, Marx’s definition is that capital is self expanding value. Consistent with this position, capital cannot “exist” without value, which is labor time objectified in the form of a commodity. (Use value and exchange value are necessary in order for a commodity to have/ be value.) But, of course, that makes exchange value, the representative of the value of commodities, the “point of departure” for capital. Thus the only possible route seems to be to move from commodities, to value — here introduce abstract labor, exchange value, socially necessary labor time, etc — to money, to capital, concluding with what happens to Marx’s law of value in capitalism — ie whether Marx’s original analysis of commodity exchange, value form, freedom and equality etc is relevant to capitalism..or not. What particularly grabs my attention is the dialectical development of exploitation and freedom in Marx’s approach to capital… ie one should try to keep their focus on how capitalists “appropriate a portion of the workers’ labor time” — which not only has/ is value but creates “surplus value” — “without exchange by means of the form of exchange”… as a “non exchange”, although “the worker receives an equivalent to his labor power from the capitalist, in accordance with the laws of commodity exchange”.

I’m taking a hiatus in reading today due to exhaustion and other issues. However, this gets to what Marx emphasizes re. explaining capital as value which self increases its money form. And means that, the center of the reproduction of labor/ means of subsistence — and expenditure of labor time— is determined by exchange value and making advances in terms of money. At the same time, allocation of labor power is regulated by the law of value through purchase and sale on the market. Means of production are used by those who own them for purposes related to profit, rent, and interest — ie not the satisfaction of need and want — as would be the case in communist society. Going on under a communist society (as, eg, pre capitalism), use value becomes the standard in terms of production, not (exchange) value or surplus value. Consequently, with these revolutionary advances in social reproduction, accumulation of capital is finished off. There are numerous use values produced (globally).. with satisfying human want and need and keeping labor time to a minimum determinately influencing distribution of labor/ means of subsistence.

In Marx’s analysis, the “exchange between capital and labor power” (ch. 12 in Rosdolsky’s “Making Capital”, pp. 194-202) is the most basic relation of capitalism. And the issue at hand is how profits consist of unpaid labor. Yet, the law of value still regulates the exchange between capitalist and worker (i.e..exchange value of labor power is traded for its exchange value in wages.)

Further developing this account..A worker exchanges labor power for wages, which can in turn be exchanged for stuff like means of subsistence; “C-M-C”. The worker exchanges his labor power for its equal value in money. On the other hand, the capitalist exchanges wages for labor power… the use value of which is production of commodities; M-C-M(+) — where M+ depicts the initial outlay of “M” plus additional, “surplus” value. At M-C, the capitalist exchanges variable capital for labor power. And production takes place in between M-C and C-M. During production, labor power is consumed by the capitalist to produce new commodities. The new commodities are then exchanged for money; and not only for money but for more money. For Marx, it is the use value of labor power, its “productive consumption”, that is the source of creating this new, additional value (hence explains the nature and origin of surplus value.)

Thus, labor power, sold by the working class to the capitalist class, has the unique characteristic of being a commodity whose use value creates an exchange value higher than its own exchange value. But, since commodities exchange on basis of their values, and labor power is exchanged as a commodity, it can be assumed the working class is compensated for the exchange value of their labor power. In the commodity market, labor power is a commodity just like all the rest, so it is reasonable to assume it is paid for by an equal value such as the others.. e.g. in wage form; which workers can use to exchange for commodities/ necessities/ means of subsistence. This is an exchange of value for value. But “value does not create value”.

Marx’s critique is the root of exploitation lies in the(surplus) value labor power creates, rather than being cheated out of its own value by the capitalist as a purchaser of labor (power). The worker transforms means of production into a product, and the capitalist pays him out in wages. But surplus value emerges from a certain form of production and not from interactions related to commodity exchange and circulation. It is labor power expended within a definite social form that produces surplus value. It is critical for Marx’s argument that surplus value is created during the process of production and is not cheated from workers in their exchange against capital,.. which is why he includes notes that “formal” equality of simple commodity exchange between buyers and sellers — where value equivalents are exchanged amongst equals — masks “concrete” relations associate with capitalist production.

What Marx is getting at is the difference between the exchange value of labor power exchanged as a commodity — the labor time required for its production — i.e. the socially necessary labor time required to produce the worker’s food, clothes, housing; to train and educate labor power; to replenish its supply — and the exchange value labor power generates during the production process. Value for value is what is paid in the exchange of commodities. Consequently it is necessary that surplus value occurs in production (not circulation, exchange, or buying labor power below its value.)

“Like every exchange of commodities, the exchange between labor power and capital is mediated by money. “Because the worker receives the equivalent in the form of money, the form of general wealth, he is in this exchange an equal vis-a-vis the capitalist, like every other party in exchange”. Of course, this equality is “only a semblance and a deceptive semblance”, and that it is rendered null and void by the fact that capital appropriates a part of the worker’s labor time “without exchange by means of the form of exchange”, hence that the workers stands “in another economically determinate relation” to the capitalist “than that of exchange” … “This semblance exists, nevertheless, as an illusion on his part and to a certain degree on the other side, and this essentially modifies his relation by comparison to that of workers in other social modes of production” (p. 197).

An addition to the debate on simple and capitalist commodity production — and a couple points to consider Marx’s theories on “value” and “surplus value”:

The argument forged by Marx suggests that relations of simple production of commodities (ie values/ exchange values) and the law of commodity exchange (ie the law of value) do not in themselves produce surplus value. Capitalism, as opposed to simple (ie, pre capitalist) commodity production, can only begin with production of surplus value. Conditions of production — and expansion — of surplus value defines capitalism. This constitutes its identifying feature.

As understood by Marx, accumulation of surplus value is a necessary function of capital; “necessary” in as much as representing its source of profit; and requires that workers produce more than the value equivalent of the daily average of commodities required for their subsistence — thus exploitation. Nevertheless, the initial laws of simple commodity exchange and relations associated with value obtain within capitalism — albeit, in a modified form — which Marx called the “average rate of profit” — such that production of commodities and exchange of equivalent values results in a greater sum of values — surplus value — profit — bestowed upon capital. Thus, as Marx indicates, equality of value form/ commodity owners coincides with exploiting workers and wage labor under capitalism.

As explained above, profits on capital in accordance with the law of value is one of the most glaring contradictions of capitalism. And the solution to the paradox lies in the unique capacity of labor power to produce more exchange value than its own. But still leaves us with, as we witness, the blind mechanisms of commodity production — which continue to interfere with satisfying human need.

Discussing value in terms of Engels; exchange of non/ pre capitalist commodities precedes emergence of capitalism. Although this is a historical development, we may also conceptually disentangle simple and capitalist commodity production. Insofar as “value” in itself is part and parcel of the process that comprises production of capital, capitalism does require simple exchange at an “abstract” level.

However, if we accept evidence cited by Engels, Marx’s account of simple and capitalist commodity production unavoidably involves a “historical” transition (ie, the undeveloped or simple form of value leads to value in full force as capital). In other words, production and exchange of equal value becomes an attempt to produce and realize surplus value. Thus Marx states that, in the form of capital, value acquires capacity to self increase — through struggle to wrest surplus value from direct producers deprived from means of production.

From the outset of Marx’s discussion, the distinguishing feature of capital is that it is a developed form of value aiming to expand its own value in excess of the costs of production. In terms of the “transformation debate”, cost prices (price without surplus value) are replaced by prices of production (cost + surplus value (profit) ). Development of this surplus value aspect stands in clear contrast to the “part of value” in simple commodity production oriented to “metamorphosis” of use values and replacement of labor time. As it turns out, surplus value becomes the only permissible reason for creation of value and exchange of commodities in capitalism. In this sense, the law of value is not renounced but rather “inverted” by capital. Marx’s conclusion is thus to dissolve the simple form of exchange — ie buying and selling commodities/ compensating based on labor time — in addition to the developed form of value/ capital.

Noticing how Heinrich’s “Intro” develops Marx’s value debate, his position on Engels’ “historical” interpretation seems to be my biggest problem so far — eg, whether simple commodity production actually preceded capitalism. Albeit, it is not my position; for Heinrich, value is an abstract logical tool to be used in theorizing capitalism, and Marx’s discussion of value begins with full blown capitalism. So basically, I think Heinrich’s concept of value is based on too restrictive a criteria, ie that value must be produced under “fully developed capitalism”; is a “relation that exists within contemporary capitalism”, where commodity form of products is “the rule” and exchange is “comprehensive”.

Of course, there are different ideas about what Marx’s concept of “value” is. And the core of Marx’s investigation in “Capital” is (obviously) geared toward capitalism..! But based on Marx — and Engels, Marx’s life long confidant — it is clear to me that commodities exchanged in terms of value based on labor time and for money well before the historical advent of capitalism. In contrast to Heinrich, consider Engels’ notion — ie value must have had simple commodity exchange as its basis, existing since ~ 500 BCE. Significantly, Heinrich also admits commodities and money existed for “thousands of years” during precaptialist social organization. Because of these conditions, it is convincing — for me — that pre capitalist buyers and sellers must have had some concept of value and thus were influenced to some extent by the law of value — And consequently were able to exchange use values with other commodity owners, their goal being to replace labor/ labor time, instead of increasing surplus value like in capitalism.

In this respect, concerning simple and capitalist commodity production — the question is about how the mechanisms of capitalism and the surplus value related demands of profit driven society influence the inherent tendencies of commodities to exchange for their value (eg, transition from simple form of value to prices of production). And I feel limiting an understanding of the notion of value and operation of the law of value to capitalism misunderstands Marx’s critique of political economy and potentially leads to reformism/ utopian socialism a la Proudhon — ie to reify value as such in Socialist society, while eliminating capital. Thus for Marx there is no way around eliminating exchange. Marx’s notion of communism provides the capacity for all to determine and satisfy their own needs without recourse to the law of value and commodity exchange; excluding the simple commodity form of products and value form of labor.