## The Rate Of Surplus Value

### 1) The Degree of Exploitation of Labour Power

Surplus Value presents itself as a surplus of the value of the product over the value of its components. These components divided into two. Firstly, 'c' being what has become the means of production, secondly 'v', being what has become variable capital, labour-power. Marx says “what has become” because the whole circuit of Capital is here M - C – (MP-LP) – C1 - M1. The Capital advanced is a sum of money M, which becomes MP and LP.

NB. The error of the TSSI in insisting on calculating Profit on the basis of M1 – M/M rather than on the reproduction costs of MP and LP is that this fails to take into account that this change in Value also involves a change in the Exchange Value of Money. As Marx set out in Chapter 3, Money is a commodity, and the Money Form – 100 yds linen = £2, can also be turned around so that £2 = 100 yds of linen. If the labour-time required to produce 100 yds of linen doubles, whereas the labour-time required to produce the money commodity remains the same, then £2 = 50 yds of linen. So, the Exchange Value of money has halved. Therefore, if M at t1 = £100, but at t2, because the value of linen has doubled, the Exchange Value of money has halved, then £200 at t2 is, in constant money terms, really worth only £100. The apparent gain is non-existent. It is a money illusion.

If a capital of £500 is advanced, it may be divided into £410 ( c) and £90 (v). It may generate a surplus value of £90 (s). We now have £500 (M) - £500 ( C) - (£410 MP + £90 LP) £590 (C1). The difference between the £500 Capital advanced, and the £590, the commodity is now worth, is the £90 Surplus Value. In calculating 'c', Marx only includes that which is actually transferred to the commodity. So, suppose the machinery employed is worth £1,054, but the wear and tear amounts to just £54, then 'c' is only £54, not £1054. He quotes Malthus,

““If we reckon the value of the fixed capital employed as a part of the advances, we must reckon the remaining value of such capital at the end of the year as a part of the annual returns.” (Malthus, “Princ. of Pol. Econ.” 2nd. ed., Lond., 1836, p. 269.)” (Note 1, p 205)

Actually, I believe Malthus' formulation is wrong, because the end of year value would include depreciation, which represents a Capital Loss rather than a transfer of value to the product. As stated earlier, depreciation occurs whether production takes place or not. Indeed, for the reasons Marx describes, depreciation will be more where production does not take place, where equipment, therefore, rusts and material deteriorates. It makes no sense to say that more value is transferred to the product the less it is used in the productive process!

The new value created is not c+v+s, as at first appears, because the 'c' has only transferred exisiting value to the product. The new value created is only v+s i.e. £90 (v) and £90 (s). If it were possible for a capitalist to simply employ a worker without the need for any constant capital, the surplus value would still exist, being the difference between the new value created by the worker, here £180, and the £90 the capitalist pays the worker, that being the value of their labour-power. By contrast, the capitalist might employ £1 million of constant capital, and yet the surplus value created would still only be £90, again the difference between the new value created by the worker, and their wages. The £1 million would only have transferred its value to the new commodity.

If the worker only produces new value equal to the value of their Labour-power, their wage, then no surplus value is created, and capital cannot expand itself.

It is only 'v' which varies. So, v+s is no different than v+v1. If the Value of Labour-power rises, 's' declines, and vice versa. The relation is obscured because looking at the value of the commodity we see not v=s, but c+v+s. However, Marx says, consistent with the usual mathematical rule, in dealing with constant and variable quantities, it is necessary to set the constant magnitude = 0, so as to see the real effects of changes in the variable magnitude.

There appears a further contradiction, as Marx points out. The £90 laid out for variable capital is not itself variable. It is a fixed amount, £90. So too is the Value of the Labour-power it has purchased. (subject to the provisos set out previously in relation to real values based on current reproduction costs as opposed to nominal money values). What is variable is the amount of new value this Labour Power creates, and consequently the amount of Surplus Value generated (being the difference between this constant value of Labour-power, and the new value created.

If, therefore, such expressions as “£90 variable capital,” or “so much self-expanding value,” appear contradictory, this is only because they bring to the surface a contradiction immanent in capitalist production.” (p 206)

As Marx says, the relation of the Surplus Value to the whole of the capital (The Rate of Profit) is very important, but its consideration is left to Volume III. For now, its important to examine the process of production of surplus value itself.

The circumstance, however, that retorts and other vessels, are necessary to a chemical process, does not compel the chemist to notice them in the result of his analysis. If we look at the means of production, in their relation to the creation of value, and to the variation in the quantity of value, apart from anything else, they appear simply as the material in which labour-power, the value-creator, incorporates itself.” (p 207)

Looking at just the new value created then, we have £180. Deducting the £90 paid out as 'v', this leaves £90 's', which constitutes the total amount, the absolute quantity of Surplus Value. But, this absolute quantity can also be expressed as a relative quantity. That is relative to the other component of new value 'v'. So, s/v gives this relative value of 's'. Marx calls this relative value, this ratio of s to v, “The Rate of Surplus Value”. It is also called the “Rate of Exploitation”, which can cause some confusion because the word “exploitation” has connotations of the necessity of driving workers ever harder. As Marx demonstrates, Capital is in fact, capable of raising s/v, whilst also lightening the physical burden, and even duration of work, and indeed of increasing workers real living standards. The real exploitation is the amount that workers hand over gratis in 's', even whilst these improvements in workers conditions take place.

Marx points out that once the source of Surplus Value is understood, and once the rate of surplus value is understood, it is a simple matter to understand the source of profit, and rate of profit. But, it is impossible to work backwards, to begin with the rate of profit, and get to an understanding of surplus value.

As a consequence of the division of labour, the worker does not produce their own means of subsistence. This is different to the slave, who worked for the slave owner for so many hours a day, a proportion of which went to produce their own food and so on, and is different to the peasant, who worked half the week on their own land, to produce their own requirements, and half the week on the Lord of the Manor's land for free. The wage worker instead works so many hours producing a commodity, say linen, whose value is equal to the value fo the commodities required for the reproduction of their Labour-power i.e. equal to the value of labour-power, equals the wage. This portion of the day, week, or year is necessary labour. Necessary because its needed to reproduce their labour-power. This is true whether its a slave, peasant or wage worker. The work done over and above this is surplus labour. The surplus labour done by the slave or peasant produces a surplus product. The surplus labour done by the wage worker, however, produces a surplus exchange value, or surplus value for short, an amount of exchange value more than is required to cover their wages/value of labour-power/labour-time required to produce their means of subsistence.

In other words, during this period of necessary labour, the worker produces a quantity of linen. Its exchange value is 15p. The capitalist, in selling it recovers the wages he has paid to the worker for producing it. The worker with the 15p they have been paid, is then able to buy enough food, shelter, clothing etc. to reproduce a day's Labour-power.

If we assume our worker is just a supplier of simple, abstract labour-power, the number of hours they have to work to produce enough value to cover the cost of reproducing their labour-power will depend upon the cost/value of the necessaries they need to consume.

But, as we have seen the worker does not just work for this amount of necessary labour-time, but for several hours more per day. During these additional hours he continues not only producing additional use values, commodities, but more importantly, for the capitalist, continues producing additional exchange values in those commodities i.e. surplus value. This is additional value over and above what what he has been paid in wages and is, therefore, additional value for which the capitalist has paid out no equivalent. They have received something for nothing. Marx calls this period “surplus labour-time”, and the labour expended “surplus labour”.

It is every bit as important, for a correct understanding of surplus-value, to conceive it as a mere congelation of surplus labour-time, as nothing but materialised surplus-labour, as it is, for a proper comprehension of value, to conceive it as a mere congelation of so many hours of labour, as nothing but materialised labour. The essential difference between the various economic forms of society, between, for instance, a society based on slave-labour, and one based on wage-labour, lies only in the mode in which this surplus-labour is in each case extracted from the actual producer, the labourer.” (p 209)

Because the value of variable capital is the same as the value of the labour power it buys and the latter is determined by the value of the commodities the worker needs to reproduce their labour-power, which in turn determines how much of the day is required for “necessary labour”, s/v is the same proportion as the ratio of surplus labour-time to necessary labour-time. They are the same thing expressed in different ways, the first expressed in Value terms, the second in terms of time.

Marx writes,

Although the rate of surplus-value is an exact expression for the degree of exploitation of labour-power, it is, in no sense, an expression for the absolute amount of exploitation. For example, if the necessary labour 5 hours and the surplus-labour = 5 hours, the degree of exploitation is 100%. The amount of exploitation is here measured by 5 hours. If, on the other hand, the necessary labour = 6 hours and the surplus-labour = 6 hours, the degree of exploitation remains, as before, 100%, while the actual amount of exploitation has increased 20%, namely from five hours to six.” (Note 2, p 209)

The method of calculating the Rate of Surplus Value is then straightforward. If we take the value of the output and deduct from it the value of the constant capital ( c) used in its production i.e. we set c = 0, we will then have the mount of new value created. If we know the value of (v) then deducting this from the amount of ew value will also give us (s), or if we know (s) deducting it from the total new value will give us (v). We can then calculate s/v.

Marx then provides a number of actual examples of such calculations. There is no point me repeating them, because its easier to simply view them at Chapter 9.