Socially Necessary Labour

Summary

• Socially necessary labour-time is the amount of labour-time required, on average, to produce a commodity.
  
• This has to be understood in two contexts, a narrow context and a wider context.
  
  • The narrow context is that each producer of the commodity is forced, by competition, to always produce by the most efficient means, so that they use no more labour-time than is necessary to produce the commodity. Each individual producer produces under different conditions of production, so that each requires more or less labour-time than other producers to produce a given amount of output. In other words, the individual value of the output of each producer differs. The average amount of labour-time required by all producers of a particular commodity, thereby, determines the socially necessary labour-time. Similarly, the average derived from aggregating all of the individual values of output for the different producers, gives the market value of the total output. Those producers that produce at an individual value below the market value make surplus profits, and those that produce at an individual value above market value, make below average profit.
    
  • The wider context is that the labour-time expended on the total production of a commodity, which thereby determines the market value of the commodity, must not result in a greater supply of the commodity than the demand for the commodity at that market value. If the supply exceeds the demand, at the market value, then labour has been expended in production that was not socially necessary, because a product, and thereby a commodity, only has value if it is a use value. A commodity for which there is no demand is not a use value, and so has no value, and the labour expended was not socially necessary. For example, if 1000 units of commodity A are produced, and the unit market value of these units is £1, if, at a price of £1, there is only demand for 800 units, then 20% of the labour-time expended was not socially necessary. It is as though the value of the 1000 units was only £800, so that the unit value is only £0.80. To sell all 1,000 units, the price per unit has to fall to £0.80.

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When Marx talks about Labour being "Socially Necessary" he does so in a specific sense. From the perspective of some rational society there are many types of labour, which today not only exist, but which are highly remunerative, that would not be needed. In fact, Joseph Schumpeter pointed out that this was one way in which Socialism would be economically more efficient than Capitalism. For example, today, huge sums are spent on marketing and advertising. The labour time spent on these activities is not designed to provide consumers with information to enable them to make rational choices about commodities, but is instead designed simply to persuade consumers to buy this product rather than some other product, to depict some qualitative difference between branded products that does not really exist, and to ensure that commodities produced by large producers, as part of a large scale long term production plan, find a market.

A society that geared its production to meet consumer needs would have no need of such wasteful and useless expenditure of resources. Similarly, huge sums are spent on litigation involving very highly paid lawyers, in respect mostly of issues surrounding disputes over property and contracts. A cooperative society would have no need of such expensive means of resolving conflicts where they arose, and the more property was collectively owned, the less such conflicts would arise. Adam Smith and other Classical economists themselves were at great pains to describe the huge waste of resources that was represented by useless functionaries such as the clergy, and the sustenance of whom, drained society's resources that could be better spent. Similar huge sums are wasted on other useless activities such as the maintenance of the Monarchy and its entourage, as well as the huge sums required to maintain a massive capitalist state apparatus, and the machinery of government. All of these wasteful expenditures of labour-time would be ended by a rational cooperative society.

However, within the context of a commodity producing society all of these activities can be considered socially necessary expenditures of labour-time. All that is required within this restricted meaning is that someone is prepared to buy the product of this labour as a commodity. The labour-time expended by an advertising specialist, or a contract lawyer is socially necessary provided some capitalist is prepared to buy it. Conversely, an expenditure of labour-time that might be considered socially necessary under a rational cooperative society, may not be so in a commodity producing society. For example, the former might see the expenditure of labour-time by a surgeon as socially necessary, and yet a commodity producing society might limit how much labour-time is devoted to it, because there is insufficient effective demand for it.

Because capitalism operates on the basis of producing first, and seeking a market for what has been produced afterwards, the potential for the effective demand being less than what has been produced is always present. In other words, labour-time has been expended that was not needed. It was not socially necessary labour-time. Marx's definition of socially necessary here is considered only in the context of a commodity producing and exchanging economy, just as with his definition of productive labour, it is delineated within the context of an analysis of capitalism, and consequently in terms of what is productive of surplus value, and the accumulation, thereby of capital.

Taking this understanding of the overall context in which Marx refers to socially necessary labour, it also falls under two headings, a narrow description and a broader description.

The Narrow Description

This assumes that everything produced is also demanded at its market value. Provided this is the case, then competition forces each producer to produce by the most efficient means possible for them. For example, its possible to produce nails from gold, but there is no reason to use gold for this purpose, as iron or some other cheaper metal will suffice at least as good, for the purpose. Using gold would not be a use of only socially necessary labour, because the labour used in producing the gold is not necessary for the purpose of producing nails. Producers of nails will seek to use the cheapest metal available that provides the utility required from a nail. In the process, this, in itself, via competition, drives the producers of iron, steel, zinc etc. to produce by the most efficient means possible so as to maximise their market share against their competitors in selling material to nail makers.

In this way, competition drives down the labour-time required for the materials used in nail making, as well as that required to produce nail making machinery, factories in which nail-making is to be undertaken and so on. So, it reduces the labour-time required to produce the constant capital consumed in nail making. The nail makers themselves also seek to minimise their own use of living labour in the production process. They seek to utilise the division of labour, to enjoy the benefits of cooperative labour, to produce on the largest scale their capital permits, so as to obtain the economies of scale, and they seek to use the latest technology so as to raise the productivity of their own workers.

Taking all this into consideration, however, each producer of nails will produce any given quantity of nails using different amounts of labour-time, because some producers will be more efficient than others, some will have various advantages than enable them to be more productive and so on. A producer close to suppliers of iron, for example, will be able to produce at a lower cost, because they will not have to bear the cost of having raw material shipped over long distances to them. Producers in an area with a history of nail-making will benefit from the fact that the workers in the area will have a history of nail production that leads to them being more adept in that line of production, the skills, thereby, being handed down from one generation to the next. Some producers may have access to cheap energy supplies to drive machinery, some may simply have more astute managers who are able to acquire cheaper materials, or organise production more effectively.

For all these reasons, each producer will require more or less labour-time to produce a given quantity of nails. Put another way, the individual value of the output of each producer will differ. But, each producer will produce as efficiently as their available capital, and the given material conditions allow them to do. So long as there is a demand for the output of all these producers, then each producer will continue in business. If the labour-time required by all these producers is aggregated, and divided across their total output, then this gives the average socially necessary labour-time required for this output. Measured across the total output it gives the market value of each unit of that output, which is, thereby, also the aggregate of the individual values of output for each producer.

But, because each producer produces output with a different individual value to its competitors, those producers that produce with a lower individual value than the market value will obtain surplus profits, and vice versa. In other words, those producers that use less social labour in their production than the average socially necessary labour, in that line of production, will make surplus profits, and this, in itself, acts as a spur for each producer to reduce the labour-time required for their own production.

The Broader Description

But socially necessary labour-time has to be considered in a broader definition. A use value is only a use value if someone has a use for it. Similarly, a product is only a product if it is a use value, and is the product of labour. A product only has value because it is a use value and is the product of labour. A commodity is a product that has been produced for the specific purpose of sale, and likewise, therefore, a commodity only has value, if it is both the product of labour, and is a use value. But, a commodity is also only a use value, if someone wants to buy it, at its market value. For commodity production and exchange, demand is only ever effective demand, i.e. demand backed by both a willingness and ability to buy at the market value.

Commodities, therefore, may be produced by the most efficient means possible at the time, and yet the labour used in their production may not be socially necessary if there is no effective demand for them, or for all of them. I might produce the cheapest car possible, using the most efficient methods possible, but if no one likes the car, and wants to buy it, the labour used in its production, both the labour used to build the car, plus the labour used to produce the materials consumed in its production etc., was not socially necessary. Similarly, if 1000 units of commodity A are produced, using the most efficient means possible, which results in a market value of £1 per unit, if there is only demand for 800 units, at a price of £1 per unit, then the labour expended in producing the 200 units not demanded was not socially necessary. It is, then, as though the labour expended on producing these surplus 200 units did not exist, so that the value of the 1000 units falls to just £0.80 per unit.

At this price, output will have to be cut back, and normally this would occur by the least efficient producer going out of business. As a result of them no longer producing, the average socially necessary labour-time required for production, and, thereby, the market value itself, falls.