What is Surplus-Value?

It’s a concept from Marxist theory that may still have some relevance today. According to Marxism, a worker creates more value in a day than he gets paid. This extra or surplus-value is taken by the capitalist. Or, in other words: “the wages of the laborer had a smaller exchange-value than the exchange value of the object he produced” (D. McLellan, “Marx”). The object is sold by the capitalist, who buys labor and pockets the difference. “[T]he workers would produce values that exceeded the reimbursement of their labor” (ibidem).

The capitalist forces the worker to work more than the hours necessary to embody in his product the value of his labor power. For example, if the value of labor power, i.e. the wage, is $50 a day, and a worker produces a good (or goods) which is worth $100 during a full day of work, then the second half of the day would yield surplus-value, in this case another $50.

This is theft, according to Marx, because the capitalist takes something which he hasn’t produced or bought. He takes the unpaid labor and products of someone else and lives on the back of someone else, simply because he has the privilege of owning the means of production. The workers have to accept this because they depend on the capitalist. They have to sell their labor power in order to survive because they do not own means of production and hence cannot produce without the consent of the capitalists. As the workers’ energy is not depleted after their own reproduction is guaranteed – through the payment of a wage – capitalists can use it to produce more.

Moreover, the capitalist continuously tries to maximize his surplus-value. He uses technology and science to increase productivity and diminish the necessary labor time per unit of production. Machines allow him to produce more with less labor. If wages stay constant and productivity goes up, then surplus-value goes up.

But wages, says Marx, do not stay constant. The capitalist also tries to make labor as cheap as possible and the working day as long as possible, at least within the boundaries set by labor law. 

If labor law does not permit extensions of the working day and wage reductions, then the capitalist uses the so-called “industrial reserve army“. This is a relatively large group, constantly available but not necessarily made up of the same people. They are unemployed, desperate to work (especially when the social safety net is absent or insufficient), ready to replace the employed and ready to accept a lower wage and a longer working day. This reserve army is a millstone around the neck of the workers, a regulator keeping wages at a low level.

Why do capitalists try to maximize surplus-value? In order to survive the competition with other capitalists.

[T]he wage-worker has permission to work for his own subsistence, that is, to live, only in so far as he works for a certain time gratis for the capitalist (and hence also for the latter’s co-consumers of surplus-value); … the whole capitalist system of production turns on the increase of this gratis labor by extending the working day or by developing the productivity, that is, increasing the intensity of labor power, etc. (K. Marx, “Critique of the Gotha Program”)

The capitalist accumulates surplus-value and wealth, and the worker accumulates misery, Marx predicts. “[P]overty and destitution develop among the workers, and wealth and culture among the non-workers. This is the law of all history hitherto” (ibidem). The “immiserization” (“Verelendung”) of the proletariat is something relative:

Marx was usually wary of claiming that the proletariat would become immiserized in any absolute sense. Such an idea would not have harmonized well with his view of all human needs as mediated through society. What he did claim was that the gap in resources between those who owned the means of production and those who did not would widen. (D. McLellan, “Marx”)

Everywhere the great mass of the working classes were sinking down to a lower depth, at the same rate at least, that those above them were rising in the social scale. In all countries of Europe it has now become a truth demonstrable to every unprejudiced mind, and only denied by those, whose interest it is to hedge other people in a fool’s paradise, that no improvement of machinery, no appliance of science to production, no contrivances of communication, no new colonies, no emigration, no opening of markets, no free trade, nor all these things put together, will do away with the miseries of the industrious masses; but that, on the present false base, every fresh development of the productive powers of labor must tend to deepen social contrasts and point social antagonisms. (K. Marx, “Inaugural Address of the Working Men’s International Association”)

The maximization of surplus-value deepens social divisions, brings despair to the workers, and hence will contribute to the collapse of capitalism, at least that’s how Marx saw it.

What use is the concept of surplus-value for us today? Wage aren’t going down, although they are stagnating; and social divisions caused by competition and the maximization of surplus value haven’t brought down capitalism. However, inequality has increased, in part because of wage stagnation, deunionization, and tax policy favoring the “productive” and local companies facing international competition. Competitiveness and productivity have become a fetish in policy circles. Labor laws, as a result, have been somewhat eroded. Blaming all this on surplus-value maximization driven by competitiveness is surely simplistic, but not completely wrong.

Communism and Corporate Democracy

In an effort to convince you that my new $19.95 book is actually worth a lot more than that, I’m blogging some excerpts. Today, the importance of corporate democracy.

What can we learn from communism? I realize that, for many people, learning from communism is like listening to the devil. But that’s intellectual laziness, dismissing something without fully understanding it. So bear with me.

For example, our capitalist systems have shed many of the extreme injustices that characterized them in the time of Marx. But it’s still the case today that ownership of the means of production yields a kind of economic power over the workers who depend on the owners and who are forced to sell their labor power because they don’t have means of production of their own.

This dependence results in economic uncertainty and possibly poverty, because of the competition between workers trying to offer the best deal to employers. The fact that no modern economy has full employment makes this competition inevitable, even though today it’s more an international than a national competition. The “reserve army” now seems to be stationed abroad. International outsourcing (or the threat of it) pushes wages down.

We should also acknowledge that economic dependence in a system of private ownership of the means of production can be psychologically detrimental in the sense that it makes creative productive activity, self-expression and self-development (which require the free use of means of production) very difficult if not impossible. Moreover, it means that people are forced to work in systems based on discipline, supervision and control. Corporations have become islands of authoritarianism in a democratic world. If democracy and self-government are important in politics, why not in business?

Given the importance of work and production in the life of an individual and their potentially beneficial role in personal self-development, and given the importance of democracy and self-government, it is justified to give people a say in the way in which the means of production are used. The owners of the means of production should not be entitled to decide unilaterally on the conditions, organization, purposes, processes and meaning of production. Production is an important part of human life and people should have a say in it.

Concretely, this means a kind of corporate democracy and corporate participation. Participation, not by the shareholders (corporate democracy is today mostly viewed as a right of shareholders), but by the people directly involved in production, i.e. the “workers”.

Communism traditionally proposes the end of the employment relationship (or the right to rent people) and the common ownership of the means of production as the ways to achieve this participation and to abolish so-called alienation (which means working for a wage, or working in an obscure system of division of labor, rather than working for a product). The workers in the factory, rather than the capitalists or the shareholders, would own the factory and all the assets in common. Or, more correctly, society as a whole, which in communism means the class of workers, would own the totality of all means of production, because otherwise the workers would be tied to one specific means of production and wouldn’t be able to switch freely to another one.

This would obviously spell the end of private property, not necessarily private property as such, but in any case private property of the means of production.

This is unacceptable because private property is an important value. It’s unequal distribution should be criticized, as well as the exclusive right of decision of the owners of the means of production, but there are good reasons to keep the right to private property more or less intact.

Common ownership of the means of production, as proposed by traditional communists, is not the only means to create corporate participation and worker control over production. Communism should simply mean the community of workers in a factory or corporation deciding more or less democratically on their work. Modern-day capitalism has in some cases reconciled private ownership with large measures of worker participation. Many decisions in companies are now taken by the owners and the workers together. (This participation is not incompatible with the free market either. A free market is a system between economic agents, not within them). But we should try to go further and extend and deepen this participation in order to make production and work more meaningful.

Private property of the means of production should not be understood as an absolute right to govern the workplace dictatorially. And the abolition of private property is not a prerequisite for corporate democracy. This is evident if we take a look at historical cases of communist rule, where private property was abolished (to some extent) but corporate governance continued much along the same lines as in capitalism. The bosses changed – autocratic party members and government bureaucracy instead of capitalists – but the workers didn’t have more influence.

This proves that corporate democracy requires something more than or different from common ownership. Private ownership, strictly speaking, gives the employer only the right to label someone a trespasser.  So abolishing ownership will not, of itself, change how production takes place. Changes have to occur, not on the level of the ownership of the means of production, but on the level of the organization of production.

You can buy the book here. More about Marx here.