Socialist Studies Socialist Studies

Reconstituted Socialist Party of Great Britain (1991) Socialist Education Series - Wage-Labour, Capital and Marx’s Labour Theory of Value.


For Marx social labour is the basis of production. When human beings produce for each other, either directly on a communal or Socialist basis, or indirectly through the exchange of their products as commodities, their individual labours become part of a social mass of labour.

In capitalism the majority of workers are cut off from direct access to the means of production. They are forced to sell their labour-power, their mental and physical ability to work, as a commodity to the capitalist class who own the means of production as private property. As Marx ironically commented they are free workers:

… in the double sense that neither form part of the means of production themselves, as would be with the case with slaves, serfs, etc., nor do they own the means of production, as would be the case with self-employed peasant proprietors. The free workers are therefore free from, unencumbered by, any means of production of their own” (CAPITAL VOL. 1, The Secret of Primitive Accumulation Ch. 26, p. 874 Penguin ed. ).

And the historical basis of labour power as a commodity is remarked upon by Marx:

Nature does not produce on the one hand owners of money or commodities, and on the other hand men possessing nothing but their own labour-power. This relation has no basis in natural history, nor does it have a social basis common to all periods of human history” (CAPITAL VOL. 1 The Sale and Purchase of Labour Power, Ch. 6, p. 273).

All commodities possess, by definition, two properties. On the one hand, in order to exchange at all, they must possess use-value or utility. On the other hand, because they exchange they must command a value. When, in capitalism, labour-power itself becomes a commodity, it must, by definition, contain these two properties; use value and exchange value.

Workers have different skill and abilities, what Marx called concrete labour. But capitalism abstracts from concrete labour all the time. And it is abstract labour which in the productive process generates value into the commodity. As Marx wrote:

A use-value, or a useful article, therefore, has value only because abstract human labour is objectified or materialized in it” (CAPITAL VOL. 1 The Commodity Ch. 1 p. 129).

Marx recognised in the process of commodity production and exchange for profit the rational basis upon which capitalism organises its production and regulates the exchange of commodities. Value by which the process of commodity production are quantified for exchange purposes, is nothing more or less than human labour-power expended in production, labour-power seen as a proportion of the total labour-power of society.

In this way capitalism abstracts from the individual differences that exist between workers and likens all kinds of concrete labour as abstract labour.

Here is how Marx once put it: “Every child knows that a country which ceased to work, I will not say for a year, but for a few weeks, would die. Every child knows too that the mass of products corresponding to the different needs require the total labour of society. That this necessity of distributing social labour in definite proportions cannot be done away with by the particular form of social production, but can only change the form it assumes, is self evident. No natural laws can be done away with. What can change, is changing historical circumstances, is the form in which these laws operate. And the form, in which this proportional division of labour operates, in a state of society where the interconnection of social labour is manifested in the private exchange of the individual products of labour, is precisely the exchange value of these products”. (Marx’s letter to Kugelmann, 11th July, 1868 CORRESPONDENCE OF MARX AND ENGELS, 1934).


Most social systems in written history have managed to produce more than they have consumed. Surplus labour has been performed and is embodied in the surplus product. What is unique in capitalism is that the entire surplus product takes the form of commodities which are of only marginal interest to the capitalists for whom they are produced. The only interest of the capitalists is to sell the commodities for more money than they invested.

As Marx stated:

His (the capitalist) aim is rather the unceasing movement of profit-making…” (CAPITAL VOLUME 1, The Transformation of Money into Capital Ch.4, pp. 254).

Making a profit is all the capitalists are interested in. In this way the surplus labour embodied in these commodities is transformed into surplus value. The use-value of the commodity labour power lies in it being the source of surplus value.

The more social labour is expended in production the more value is created. But the effort and degree of productivity in producing commodities is not static. Productivity is constantly changing according to advances in the techniques of production.

Social labour employed under old-fashioned technical conditions of production (for example using hand tools rather than power tools or a typewriter rather than a word processor) is clearly socially unnecessary. Capitalists using such techniques would be competed out of business. So the measure of value has to be socially necessary labour, that is, social labour using the “average” techniques available to capitalism at that time.

Given the particular use-value to the capitalist of the commodity labour-power, the basis of its exchange value follows logically.

The value of any commodity will depend upon the socially necessary labour power embodied in its production.

Marx wrote:

socially necessary labour-time is the labour-time required to produce any use-value under the conditions of production normal for a given society and with the average degree of skill and intensity of labour prevalent in that society” (CAPITAL VOLUME 1, The Commodity Ch. 1, p. 129).

The means of production themselves are the product of embodied labour-power. Only the “free-gifts” of nature will possess no economic value since they do not require labour-power to be expended in their production. But even free gifts of nature like honey from a swarm of bees might require the expenditure of labour-power to collect the honey, and if this is carried out by an employer it will embody value.

The value of the commodities consumed by workers necessary for this recreation and procreation is the value of labour-power.

…the labour-time necessary for the production of those means of subsistence; in other words, the value of labour power is the value of subsistence necessary for the maintenance of its owner” (CAPITAL VOLUME 1, The Transformation of Money into Capital Ch. 6, p. 274).

Also, these means of subsistence must include:

…the sum of means of subsistence necessary for the production of labour-power must include the means necessary for the worker’s replacement, i.e. his children, in order that this race of peculiar commodity-owners may perpetuate its presence on the market” (CAPITAL VOL. 1, The Sale and Purchase of Labour Power Ch. 6, p. 275)

For educated skilled labour we must add the costs of education in terms of the value of commodities:

The costs of education vary according to the degree of complexity of the labour-power required. These expenses (exceedingly small in the case of ordinary labour-power) form a part of the total value spent in producing it” (CAPITAL VOL, The Sale and Purchase of Labour Power Ch. 6, p. 276).

Unlike other commodities, the value of labour power has a historical and “moral” element which varies from country to country and over time:

In contrast, therefore, with the case of the other commodities, the determination of the value of labour-power contains a historical and moral element. Nevertheless, in a given country at a given period, the average amount of the means of subsistence necessary for the worker is a known datum” (CAPITAL VOLUME 1, The Sale and Purchase of Labour Power Ch. 6, p. 171)

It is important to remember that the subsistence level is not a physical minimum. It increases over time due to the position of capital and labour in the class struggle:

The ultimate or minimum limit of the value of labour-power is formed by the value of the commodities which have to be supplied every day to the bearer of labour-power, the man, so that he can renew his life-process. That is to say, the limit is formed by the value of the physically indispensible means of subsistence. If the price of labour-power falls to this minimum, it falls below its value, since under such circumstances it can be maintained and developed only in a crippled state, and the value of every commodity is determined by the labour-time required to provide it in its normal quality” (CAPITAL VOL. 1 The Sale and Purchase of Labour Power Ch. 6, p. 276-277).

And the value of labour-power, thus determined, manifests itself only in exchange. The price paid for labour-power is the wage.


Definitions of “capital” in economic textbooks are a million miles away from Marx’s discussion of capital. We could say that academic definitions of capital inhabit a different planet. Here is a definition of capital from the DICTIONARY OF ECONOMICS:

Assets that are capable of generating income and that have themselves been produced. Capital is one of the four factors of production and consists of the machines, plant and buildings that make production possible, but excludes raw materials, and can be seen as holding the stored value of them. If a Stone Age man spent 1 day producing a tool (a capital good) he gained no utility from doing so at the time. He did however, save labour by using the tool thereafter. By building the tool he had, in effect, put some labour away for use at a later date. The essence of capital, therefore, is that it represents deferred consumption…” (Editors, G. Bannock, R.E. Baxter, E. Davis Penguin 2003 seventh ed).

Capital is presented here as a “thing”. Note the solitary Stone Age Man, a fiction like Defoe’s Robinson Crusoe and Adam before the fall, with no discussion by the authors of different social systems, social relations of production and social labour. And the flint tool as “capital” gives the convenient impression that capitalism has existed forever. And whose sacrifice? Stone Age man is supposed to hold a utility theory of value although it did not come into fashion until the 1870’s with Jevons et al!!!! And note that the word “profit” is not mentioned as not to alarm the sensibilities of the reader. And until recently it was three factors of production (land, capital and labour) but out of nowhere it is now four factors of production–presumably “finance” -all thrown together into a vulgar economic broth.

Marx would have considered this definition of capital as an example of “vulgar economics”. The definition of capital is superficial and apologetic.

As Marx noted:

…the more economic theory is perfected, that is, the deeper it penetrates into its subject matter, the more it develops as a contradictory system, the more it is confronted by its own, increasingly independent, vulgar element, enriched with material which it dresses up in its own way until it finally finds its most apt expression in academically syncretic and unprincipled eclectic compilation. To the degree that economic analysis becomes more profound it not only describes contradictions, but it is confronted by its own contradictions simultaneously with the development of the actual contradictions in the economic life of society. Accordingly, vulgar political economy becomes increasingly apologetic and makes strenuous attempts to talk out of existence the ideas which contain the contradictions… (THEORIES OF SURPLUS VALUE, Part III, p. 501).

And the distortion of social relations with respect to the so-called factors of production is commented upon by Marx:

Capital-Profit (or better still capital-interest), land-ground-rent, labour-wages, this economic trinity as the connection between the components of value and wealth in general and its sources, completes the mystification of the capitalist mode of production, the reification of social relations, and the immediate coalescence of the material relations of production with their historical specificity; the bewitched, distorted and up-side down world haunted by Monsieur le Capital and Madame la Terre, who are at the same tome social characters and mere things” (CAPITAL VOL. III, The Trinity Formula Ch. 48 p. 968-969).

Capital has not always existed. Workers exchanging their labour-power for a wage pre-suppose the existence of capital which has to be advanced in the forms of wages and salaries to buy the commodity labour-power. But what is capital? And what are the laws governing its genesis and its political termination in human history. These questions were the main concern of Marx’s most important three volume work, CAPITAL.

The whole purpose of CAPITAL and other writings was to demonstrate that capital was not a “thing”, simply a means of production, but a social relationship between capital and labour.

Of capital as a social relationship Marx wrote:

Capital consists of raw materials, instruments of labour and means of subsistence of all kinds, which are utilised in order to produce new raw materials, new instruments of labour and new means of subsistence. All these component parts are creations of labour, products of labour, accumulated labour. Accumulated labour which serves as a means of new production is capital.
So say the economists.
What is a Negro slave? A man of the black race. The one explanation is as good as the other.
A Negro is a Negro. He only becomes a slave in certain relationships. A cotton-spinning machine is a machine for picking cotton. Only in certain relationships does it become capital. Torn from these relationships it is no more capital than gold in itself is money or sugar the price of sugar
(WAGE-LABOUR AND CAPITAL, Foreign Language Press, p.29).

For Marx, capital cannot be easily defined because it is a process taking into account constant capital, variable capital, fixed capital, money capital, capital accumulation, the centralization and concentration of capital and so on. Marx was interested in the laws acting on capital in motion as the self-expansion of value. And this analysis takes three volumes of CAPITAL.

However, in WAGE-LABOUR AND CAPITAL Marx noted that:

The means of production become capital only in so far as they have become separated from the labourer and confront him as an independent power” (loc. cit)

Capitalist relations exist only where labour power itself has become a commodity. In this sense capital is social power. The worker has to sell his labour power because the capitalist owns the means of production. Marx wrote:

Capital shows itself more and more to be a social power, with the capitalist as its functionary – a power that no longer stands in any possible kind of relationship to what the work of one particular individual can create, but an alienated social power which has gained an autonomous position and confronts society as a thing, and as the power that the capitalist has through this thing ” (CAPITAL VOLUME III, Development of the Law’s Internal Contradictions Ch. 15 p. 373)

And again:

Capital is not a thing, any more than money is a thing. In capital, as in money, certain specific social relations of production between people appear as relations of things to people, or else certain social relations appear as the natural properties of things in society.” (APPENDIX: Results of the Immediate Process of Production Penguin edition of Capital Volume 1 page 1005).

Capital, as social power, takes on different forms beginning with money capital. Money capital advances wages and salaries to workers whose labour power then becomes variable capital generating surplus value. In the workplace, workers confront raw resources, machinery and so on as variable capital which is nothing more than past exploited labour. Capital, as social power over the working class, assumes different forms in the course of production, circulation and accumulation. In one place Marx refers to “living labour” being oppressed by “dead labour”; Capital as a vampire; the dead only being kept alive by sucking the blood of the living.

The outstanding feature of capitalism is that it is a system of commodity production and exchange for profit under pain of competition. And although today multinationals and large companies have largely replaced the typically small businesses of the nineteenth century, even these have to face global competitive markets.

Success means survival and growth. Failure means takeover or bankruptcy (one capitalist kills many). Although the size of a business alone is not always a sufficient condition for success, it is often a necessary one for two reasons. Large scale commodity production brings economies of scale, or lower unit costs, and therefore greater market efficiency in production, marketing and sales.

Largeness also helps bring credit-worthiness with the banks and political and economic pulling power with the State, as well as the resources for financing research and development, and finally the reserves to draw upon during an economic crisis and subsequent depression.

Because of these competitive environment capitalists constantly have to judge themselves in relation to the performance of rival capitalists particularly in relation to sales turnover, profit, returns, share of the market and so on. The ultimate test for this judgement is the proportion of the total social labour or value a capitalist can command. Consequently Marx saw capital as a social power; the power of “dead labour” over “living labour” as he put it.

Marx often characterised the capitalist as the “trustees of capital” or as “personified capital” (Results loc cit p. 989). The capitalist:

does not produce in order to satisfy his needs with the product; he produces with absolutely no direct regard for consumption. He produces in order to produce surplus value” (THEORIES OF SURPLUS VALUE, Part 1, p. 88).

In conclusion, there is the political status of capital:

Without a class dependent on wages, …, there can be no production of surplus value; without the production of surplus-value there can be no capitalist production, and hence no capital and no capitalist!” (loc cit Result of the immediate process p. 1005).

The working class are not dependent upon the capitalist class. It is in fact the other way around. Workers do not need capitalists to produce useful things to meet human need. But the capitalists need the working class for their unearned income of rent, interest and profit.

For the capital-labour relationship to be broken requires the wage worker to be no longer a wage worker. And that requires the working class working consciously and politically to abolish the wages system.

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