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Reconstituted Socialist Party of Great Britain (1991) Socialist Education Series - How the Workers are Exploited

What is Value?

Marx developed a labour theory of value to analyse capitalism and class relations between the working class and the capitalist class. Marx's intention was to show how class exploitation arose under capitalism, why it led to class struggle and why the class struggle could only end with the abolition of the wages system and the establishment of Socialism.

The first step in understanding of the commodity is note that it has a use-value and an exchange value. The next consideration is to formulate how the value of a commodity occurs. Value is determined by the amount of socially necessary labour required for its production. This is what Marx wrote:

"The magnitude of the value of any article is the amount of labour socially necessary, or the labour-time socially necessary, for its production" (CAPITAL VOLUME Volume 1, p.6).

Unlike Ricardo, Marx applied the labour theory of value to labour itself.

The value of labour power is determined, like any commodity, by the socially necessary labour that is required for its production.

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Exploitation under Capitalism

Exploitation is a necessary consequence of capitalism. The working class are exploited not because of low wages or bad working conditions. And they are not exploited because of nasty capitalists or from being cheated.

In fact Marx assumed that the worker gets the full value of his labour power.

By labour power Marx means "the aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces use values of any description" (CAPITAL Volume 1, Ch. 6, p. 167).

So how does exploitation take place? How does the capitalist receive more capital than when he first started?

Before these questions are answered a little should be said about gold. Marx often converted values into money units by finding out how much socially necessary labour is embodied in 1g of gold, and then uses the price of gold to convert labour units into money units.

Marx's use of gold as the "universal equivalent" by which other commodities are measured in socially necessary labour time holds good whether governments are formally on or off the gold standard. The law of value cannot be abolished by government decree and the Labour theory of value holds true while capitalism lasts.

Assume a worker needs food, shelter, clothes, transport costs, leisure time, and fuel to have adequate energy to work efficiently and support a family. Obviously there are other needs but we are just going to concentrate on the six we have mentioned above.

Further assume that six hours of socially necessary labour time produces 1g of gold which sells at £85. And say for the sake of argument that it takes one hour socially necessary labour time to produce food at a cost of £10, one hour for shelter at £50, one hour for clothes at £5, one hour leisure time at £10, and one hour for fuel at £10.

The subsistence commodity "basket" necessary for the worker to work for the capitalist is a number of items of food per day, rent/mortgage, clean clothes, cost of getting to work by car or public transport, the purchase of a television set and the bills for water, gas and electricity. Each commodity is different and the value of labour power measured in labour time is six hours.

If the prices of commodities are to be met then the worker must have a daily wage of £85 for six hours work.

In the illustration above, 6 hours expenditure of labour-power produces 1g of gold worth £85, that is, 1 hour produces gold worth £85/6 = £14.17p. Therefore, 6 hours of socially necessary labour time can be expressed as £85.

This is the simplification Marx adopts in the first two volumes of CAPITAL where he assumes values equals prices.

To recap, the worker has laboured six hours producing a value equivalent to £85 which he can use to buy the necessary commodities the worker and his family need in order to exist.

Let the working day be eight hours. The worker has sold his labour power to the capitalist at its value and this necessary labour time has been six hours. This means that the capitalist has control over the worker's labour power for a further two hours. The worker has to continue on working for the capitalist for free for an additional two hours. The value the worker creates in this time Marx called "surplus value".

Suppose the worker produced a widget and the socially necessary time to produce the widget was six hours and was reflected in £85 he receives as a wage but he has had to carry on working for an additional two hours (Marx called it surplus labour time) and the value of the commodity becomes £100. The £15 difference between the socially necessary labour time reflected in the wage and the final value of the product created by surplus labour is pocketed by the capitalist. In short the worker produces more wealth than he receives in his pay packet.

When the capitalist sells the commodity on the market, all things being equal, the surplus value is realised as profit. Profit is unearned income and is divided into industrial profit, rent and interest. From profit comes the payment for the capitalist State.

The process is more complicated than the simplified example set up above. But the illustration shows that the working class are as exploited as the slave and the serf were exploited in previous social systems by the owners of the means of production having control over surplus labour time.

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Exploitation and the Class Struggle

We can now look at exploitation and its relation to the class struggle.

Given the level of wages to reproduce the worker and his family, surplus value can be increased in one of two ways:

* Increasing the length of the working day (Marx called this absolute surplus value).

* Decreasing the value of labour power, that is, by decreasing socially necessary labour time (Marx called this relative surplus value)

Absolute surplus value can be increased by an extension of the working day, but this depends on the relative strengths of the capitalist class and the working class.

"Hence is it that in the history of capitalist production, the determination of what is a working day, presents itself as the result of a struggle, a struggle between collective capital, i.e., the class of capitalists and collective labour, i.e., the working class". (CAPITAL VOLUME I, Ch. 10, p 235).

As an example we can consider the recent concern of the TUC on the number of additional hours workers are having to work. Lunch is reduced from one hour to ½ an hour or reduced to nothing at all giving the capitalist additional labour time. Unpaid over-time is another recent trend.

"Senior managers have overtaken teachers to leap to the top of the 2006 unpaid overtime league…Top managers who do unpaid hours put in on average an extra 12 hours of unpaid work each week - an increase of more than two hours from 2005. If they did all their unpaid overtime at the start of the year managers would not get paid until March 24, and if paid for their extra hours would be £24,000 a year better off.

Teaching professionals have been pushed back to second place, although their unpaid overtime is the same as in last year's league table at 11 hours 36 minutes per week, on average. If they did all their unpaid hours at the start of the year they would not be paid until March 22, and if paid for them would be earning nearly £10,000 extra a year
". (TUC UNPAID OVERTIME LEAGUE TABLE February 24th 2006)

Relative surplus value can be increased by decreasing the value of labour power. The value of labour power can be decreased by increased labour productivity in producing the commodities workers need to survive, say food. If there is increased productivity in the food producing industry each unit of food would have less socially necessary labour time embodied in it and the cost to the worker of his food would fall and the value of his wage needed in buying food would fall.

Another way in which productivity can be increased is by a capitalist making a group of workers redundant re-employing half that number but making them carry on the same out of work for less pay. Increasing the intensity of exploitation is a common practice in the class struggle.

Abolition of the wages system takes the class struggle into the political domain and is the only way in which class exploitation and class struggle can be ended.

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Appendix 1). Senior's "Last Hour".

We now come to the question of Senior's LAST HOUR (CAPITAL VOLUME 1, Ch. IX, The Rate of Surplus Value p. 215-221 Progress Publishers 1970).

Marx first dealt with the question of Senior's last hour in a letter to Engels (LETTER ON "CAPITAL" p. 107-9). Senior thought that the capitalist gets his "entire profit and interest … from the last unpaid working hour"

Remember; Senior has no understanding of surplus value or the distinction between necessary and surplus labour time. He also had no understanding of labour-power. However Marx points out that in practice "Mr Bourgeois is very clear about the source and substance of his profit".

Senior set out to show that the whole net profit comes from the last hour.

Marx criticises Nassau Senior' pamphlet LETTER'S ON THE FACTORY ACT (1837) in which he defended the British manufacturers against the Factory Acts and against the workers' efforts to reduce the working day to 10 hours. Senior argued that the reduction of the working day by one hour would wipe out all manufacturing profits.

Senior's argument in Marx's view was that the component parts of the total value of the final commodity can be represented by proportional parts of the time worked (as Marx described in section 2 of CAPITAL VOLUME 1).

In Senior's case, given a working day of 11.5 hours, the value of constant capital and variable capital (c + v) is represented by 10.5 hours, the value of surplus value ("s") by 1.0 hours. If, Senior concludes, the working day is reduced by one hour, from 11.5 to 10.5, the surplus value "s" will be eliminated

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Marx's Critique

Marx considers this a stupid argument. Why would a reduction of 1 hour drop surplus value "s" to zero? Why not drop constant and variable capital (c+v) to 9.5 and use less constant capital and labour power?

More seriously for Senior is the fact that in each hour of the working day, constant capital ("c") is being used up and its value transferred to the commodity through the expenditure of labour power, therefore a reduction of one hour would reduce not only total labour time but also the use of constant capital.

This can be seen in the following example:

Assuming the ratio of surplus value to variable capital (s/v) equals 100%, then 5.75 hours are producing variable capital ("v") and 5.75 hours are producing surplus value ("s"), (where 5.75 hours + 5.75 hours = 11.5 hours). A reduction of one hour, assuming wages remain constant would drop the surplus value ("s") from 5.75hours to 4.75 hours and lower the rate of surplus value from 100% to 82.6%, hardly an elimination of profit!

Marx concludes:

"But this dreadful "last hour", about which you have invented more stories than have the millenarians about the day of judgement, is "all bosh". If it goes, it will cost neither you, your net profit, nor the boys and girls you employ, their "purity of mind"

An ironic remark against another Economists, Dr Ure, who believed that if the children were allowed another one hour out of the factory they would become depraved and entertain the "idleness and vices" of the street

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Marx's terminology

C = Capital

c = constant capital; the sum of money laid out on the means of production

v = variable capital; the sum of money expended on labour power

s = surplus value

During the production process C=c + v is transformed into C' = (c+v) +s where "s" is created by the exploitation of variable capital "v".

Marx defines the rate of surplus-value, or rate of exploitation, as s/v.

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