Marx and Surplus Value
Marx thought that his theory of surplus-value his most important contribution to the progress of economic analysis (Marx, letter to Engels of 24 August 1867):
The best points in my book are: 1. (this is fundamental to all understanding of the facts) the two-fold character of labour according to whether it is expressed in use-value or exchange-value, which is brought out in the very First Chapter; 2. the treatment of surplus-value regardless of its particular forms as profit, interest, ground rent, etc. This will be made clear in the second volume especially. The treatment of the particular forms in classical political economy, where they are forever being jumbled up together with the general form, is an olla potrida (rotten pot of stew)
. Marx, by using his theory of value to analyse “capitalism in motion” placed capitalism within a historical context allowing him to explain why and how exploitation takes place within the profit system, the peculiarity of the class struggle under capitalism and the contradictions which bear on commodity production and exchange for profit.
The origin, nature and distribution of surplus value play a central role in Marx’s analysis of capitalism. “surplus value” is the translation of the word “Mehwert” which means “value-added” and is used by Marx to explain how invested money capital brings in more money capital as profit than first invested (M> C > M1, where M is the original money-capital, C is the production of commodities and M1 the original investment plus profit).
Capitalists and workers meet on the labour market on apparent equal terms where the workers sell their labour power to the capitalist in exchange for a wage or a salary. The capitalist pays the worker according to the value of the labour power. Marx made the important distinction between labour-time and labour power. It is not labour which the worker sells to the capitalist, but his capacity to work.
The value of labour power is determined like any other commodity by the amount of socially necessary labour time embodied in its production. The capitalist pays according to the exchange value of the commodity, but obtains the use value of the labour power.
This distinction between the use value and exchange value of the commodity labour power is important in understanding Marx’s concept of surplus value. The commodity, labour power, is a peculiar commodity in as much as the value it creates in the productive process is in excess of its own original value.
The worker, having sold their labour power to the capitalist has now lost control of its use. Instead, the capitalist has use of the worker’s labour power for a specified period of time – the working week.
The worker, having sold his labour power, must work and produce to the dictates of the employer. He has to produce what the capitalist wants him to produce. And what the worker produces as commodities belong to the capitalist.
So how does surplus value arise in this process? Engels expressed the question in Anti-During (1877) as follows:
"Whence comes this surplus-value? It cannot come either from the buyer buying the commodities under their value, or from the seller selling them above their value. For in both cases the gains and the losses of each individual cancel each other, as each individual is in turn buyer and seller. Nor can it come from cheating, for though cheating can enrich one person at the expense of another, it cannot increase the total sum possessed by both, and therefore cannot augment the sum of the values in circulation. (...) This problem must be solved, and it must be solved in a purely economic way, excluding all cheating and the intervention of any force — the problem being: how is it possible constantly to sell dearer than one has bought, even on the hypothesis that equal values are always exchanged for equal values?
We can answer the question with the following example. Say the working week is forty hours long. And in this working week it takes the worker 30 hours to reproduce the value of the wage or salary necessary to buy commodities for the worker and their family to produce and reproduce themselves as workers.
However, the worker cannot just stop work when they have reached 30 hours; the worker must continue to work for free for a further 10 hours of work.
The 10 hours of surplus labour time creates the surplus value. This is the source of the capitalist’s profit. This surplus value is congealed with the commodities the worker produces and is realised as profit once the commodities are sold on the market.
The surplus value as profit is divided as unearned income between the industrialist (profit), the landlord (rent) and the banker (interest) while another portion goes to the capitalist state in the form of taxation.
For the working class, surplus value, explains why the capitalist class will not leave them alone. Capitalists are always trying to extend and intensify the rate of exploitation by making workers work harder: by lengthening the working day, by introducing new machinery, by displacing workers and making those remaining taking a greater burden of the work for the same pay.
As an analytical tool for explaining how capitalism works, Marx’s theory of value has no rival.
Object and Declaration of Principles
The establishment of a system of society based upon the common ownership and democratic control of the means and instruments for producing and distributing wealth by and in the interest of the whole community.
Declaration of Principles
THE SOCIALIST PARTY OF GREAT BRITAIN HOLDS:
1. That society as at present constituted is based upon the ownership of the means of living (ie land, factories, railways, etc.) by the capitalist or master class, and the consequent enslavement of the working class, by whose labour alone wealth is produced.
2. That in society, therefore, there is an antagonism of interests, manifesting itself as a class struggle, between those who possess but do not produce and those who produce but do not possess.
3.That this antagonism can be abolished only by the emancipation of the working class from the domination of the master class, by the conversion into common property of society of the means of production and distribution, and their democratic control by the whole people.
4. That as in the order of social evolution the working class is the last class to achieve its freedom, the emancipation of the working class will involve the emancipation of all mankind without distinction of race or sex.
5. That this emancipation must be the work of the working class itself.
6. That as the machinery of government, including the armed forces of the nation, exists only to conserve the monopoly by the capitalist class of the wealth taken from the workers, the working class must organise consciously and politically for the conquest of the powers of government, national and local, in order that this machinery, including these forces, may be converted from an instrument of oppression into the agent of emancipation and the overthrow of privilege, aristocratic and plutocratic.
7. That as all political parties are but the expression of class interests, and as the interest of the working class is diametrically opposed to the interests of all sections of the master class, the party seeking working class emancipation must be hostile to every other party.
8. The Socialist Party of Great Britain, therefore, enters the field of political action determined to wage war against all other political parties, whether alleged labour or avowedly capitalist, and calls upon the members of the working class of this country to muster under its banner to the end that a speedy termination may be wrought to the system which deprives them of the fruits of their labour, and that poverty may give place to comfort, privilege to equality, and slavery to freedom.