This post in the Anticapitalist Chat supports a group reading of Karl Marx’s Capital Vol 1. #GoodMorningMarx #WeeklyMarx
Chapter 16 of volume 1 of Capital is called “Absolute and Relative Surplus Value” and discusses the nature of labour, surplus value and surplus labour time. This chapter begins Part 5 of Capital (which comprises Chapters 16, 17 and 18). Marx opens his chapter with a discussion of the nature of productive labour. Under the capitalist mode of production, the commodity ceases “to be the direct product of the individual, and becomes a social product, produced in common by a collective labourer, i.e., by a combination of workmen, each of whom takes only a part, greater or less, in the manipulation of the subject of their labour” (Marx 1906: 558). So the collective worker does not produce a complete use-value by himself, but only a part of it (Brewer 1984: 61; Harvey 2010: 237). Harvey (2010: 237–238) raises the question whether cleaners, janitors, managers, and the people in charge of advertising and marketing count as productive workers in factories in Marx’s theory, an interesting point. Capitalism is a system which subordinates free labourers to capitalists (Marx 1990: 643). Marx states: “So far as the labour-process is purely individual, one and the same labourer unites in himself all the functions, that later on become separated. When an individual appropriates natural objects for his livelihood, no one controls him but himself. Afterwards he is controlled by others.
3. Surplus Value
There are two distinct ways for a capitalist to increase surplus value, as shown in the following diagrams:
Method #1 entails an increase in the working day. If the capitalist can get away with this without increasing pay, surplus value will clearly increase. Marx called this Absolute Surplus Value.
Method #2 entails a decrease in necessary value, with the working day remaining constant. This means the worker is paid less, and more surplus value is left for the capitalist. Marx called this Relative Surplus Value.
If surplus value is capitalism's heart, capital is its living soul. Nevertheless, definitions of this central term vary widely.
Standard economists see capital as the buildings, machines, and materials used in production, or alternatively as the money required to purchase these assets. Using this definition, capital has been employed through much of history.
Many environmentalists see capital as a stock from which a revenue or other benefit can arise. Here the generalization goes even further: capital is not only the material or monetary basis of production, it also refers to natural resources (“natural capital”), social values (“social capital”), and human skills (“human capital”).
Marx's definition differs significantly from either usage. For him, capital is specific to capitalism (hence the system's name), and refers to exchange-value that expands in production through the addition of surplus value. Capital can take the form of tangible productive assets, just as it can take the form of commodities and money, but its essence is the recurring cycles of expanding exchange-value in production and market exchange.
The following diagram summarizes this process:
Several new terms are introduced here.
- VARIABLE CAPITAL is money used to purchase labor-power. This portion of capital expands in production through the addition of surplus value.
- CONSTANT CAPITAL is money used to purchase means of production (buildings, machinery, etc.) and raw materials. This portion of capital does not expand in production.
- NECESSARY LABOR is that portion of labor time that will be transformed into necessary value.
- SURPLUS LABOR is that portion of labor time that will be transformed into surplus value.
Production is initiated when one or more capitalists, perhaps in the form of a corporation, accumulate enough money to purchase the labor-power, means of production, and raw materials required for the chosen commodity. In other words, they are able to advance sufficient variable and constant capital for the selected process.
In the initial production cycle, the advanced variable capital purchases labor-power (necessary labor), and the advanced constant capital purchases means of production and raw materials.
During the production process, necessary labor creates necessary value, and surplus labor creates surplus value. Both forms of exchange-value are transferred to the commodities being produced.
Exchange-value is also transferred from the means of production and the raw materials. These elements of the process are themselves commodities from a prior production process, and therefore have exchange-values. It is these previously created exchange-values that are transferred to the new commodities.
The entire exchange-value in the raw materials is transferred. For the means of production, only the fraction used up in the process is transferred – hence the dashed lines in the drawing. For example, if the exchange-value of a machine is 1,000 units of a currency, and if it can produce 10,000 units of the commodity before being worn out, then it transfers 0.1 units of the currency to each unit of the commodity.
After the initial cycle, our capitalists possess commodities that contain necessary value, surplus value, and the exchange-value transferred from the means of production and the raw materials. The trick now is to sell these commodities in the market at the anticipated prices so that all these values can be turned back into money, including the anticipated profit.
If this is successfully accomplished, then money will be available to pay the necessary labor, means of production, and raw materials for the next production cycle. In addition, surplus-value will be available for capitalist consumption and to re-invest in production to grow the enterprise. This cycle continues until business conditions or other circumstances bring it to a halt.
In this process, capital starts as money, is transformed into productive assets and then commodities, and is finally transformed back into money – augmented by surplus value – through commodity sales in the market. This is capital – expanding exchange-value through the cycle of production and exchange.[…]
For capitalists, the problem with a declining ratio of variable to total capital is that the profit rate will decline, as shown in to top graph at right. This is true because variable capital is the source of surplus value. Unless the rate of surplus value increases, this declining ratio will mean that for every unit of total capital invested, less profit will result. This is acceptable only to a limited degree, beyond which the social and economic status of capitalists will be threatened.