Surplus Value

• Value is Labour.   Surplus value is surplus labour.
  
• Labour is performed by free labourers whose ability to undertake such labour, their labour-power, is a use value.
  
• The production of this use value, is inseparable from the production of the labourer themselves.  The value of labour-power, is then the value of reproducing the labourer.  In other words of reproducing all of the food, clothing, shelter and other use values, required for their reproduction.
  
• The labour required to reproduce the labourer, and so their labour-power, is necessary labour, and is constituted in that mass of use values required for their reproduction.  It constitutes the necessary product.  Any labour undertaken in excess of that necessary labour is surplus labour, and is constituted in a surplus product.
  
• Every mode of production is distinguished by the form on which this surplus labour is pumped out of the labourers.

Every society beyond the most primitive produces a surplus product. Surplus Value is the form this surplus assumes under Capitalism.

Every society's total production is divided into essentially three component parts. Imagine Robinson Crusoe on his island. The first thing he needs to do is to stay alive. That means he has to provide himself with sufficient food, shelter, and clothing. In other words, he has to produce all those things required for his own immediate consumption.

He might begin, then to meet these needs by using just what he has immediately at his disposal for that production. In other words, the only tools he will have are his own hands. He will begin by trying to meet his need for food, by going out and picking nuts and fruits, or roots. Even catching fish or animals might not be practical at this stage, because to trap rabbits you need to build traps, to catch fish you might need to build nets, or create a fishing rod.

But, the limitations of that, will quickly lead him to set aside some of his time to produce these other tools that will enable him to fulfil these other tasks as well as increase his productivity. But, it can be seen that in order to carry out this second type of work, producing tools, he already has to have been able to produce a surplus for his immediate needs from the first kind of work. If Robinson is physically capable of working only 10 hours a day, and has to work all that time collecting fruits, roots and nuts, he will have no time left over to produce tools. He must be able to spend say 8 hours a day collecting food, leaving him with 2 hours a day left over to make fishing nets, or build animal traps.

The product of the first type of activity is called means of consumption, and the second type, means of production. The first is devoted to allowing Robinson (society) to consume, the second to produce. But, of course, the second, by facilitating an increase in production, also means that the first results in more output, which in turn means that more can be consumed. But, we have also identified the third component of society's total production – that is the surplus that was required in order that a proportion of the available social labour-time (here just Robinson's time) could be devoted to the production of tools (means of production) i.e. for investment.  The 8 hours that Robinson had to devote to producing his immediate requirements for consumption, were Necessary Labour, whilst the 2 hours he had left over constituted Surplus Labour.  It is this division in each type of society between Necessary Labour and Surplus Labour that provides the basis for the Surplus Product, and under Capitalism for Surplus Value.

But, once Robinson has created means of production, he is then also forced to continue to devote a proportion of his time to that activity if he is to ensure that his level of production does not fall. Animal traps have to be continually built and set, fishing nets have to be repaired, and occasionally new ones made, fishing rods too have to be replaced. At a certain stage, Robinson captured animals, and domesticated them. These too then formed means of production – they provided eggs, milk etc. But, when such animals die or are slaughtered for consumption, they have to be replaced. Moreover, a certain amount of time has to be devoted to caring for the animals, to providing them with feed, to building and repairing corrals and pens.

So, now out of his ten hour day, he might be able to spend less time providing means of consumption, because his level of productivity has risen due to the means of production he has created, but he has to spend an increasing proportion of his day simply replacing the means of production he has previously created. He might now spend only 4 hours a day producing the food he requires, the clothing he needs, and shelter required, and these might all be of greater quantity and quality than he had previously, but spend a further 4 hours tending his animals, repairing his pens and so on. That will still leave him the same 2 hours of surplus time in the day, which he can use to provide himself with additional tools, animals and so on.

Of course, what he can produce in this 2 hours will itself be more than it was previously, because all the tools etc. he has built have increased his productivity.

So, we have here the three component parts of total production that arise in every society. The only thing that changes in one society compared to another is the form that these component parts assume. Here Robinson does not think about it too much. He knows he needs to devote a given amount of his time to producing means of consumption, because without that he cannot live. His second requirement is to devote the time required to replace the means of production that he uses up, because without that his production will be reduced as his animal stock declines, his tools wear out, and his productivity falls. Only after these two basic requirements are met, can he consider what to do with any surplus production he has. He might decide to eat or drink it, to store it up, to use it for seed etc.

But, all of these decisions are in fact constrained by the Law Of Value. It states that the Value of any Use Value is determined by the labour-time required for its production. So, if Robinson can only physically work for 10 hours a day, and it requires 8 of those hours just to produce the means of consumption, he will be constrained to spend 80% of his time producing means of consumption. That is the second element of the Law of Value, which states that the allocation of social labour-time between the production of different types of Use Value is determined by the relative amounts of labour-time required for their production. Here this applies to the division of Robinson's time between producing Means of Consumption and Means of Production, but it also applies at a more individual level than that between different Use Values, which may themselves be Means of Consumption or Means of Production.

For example, suppose Robinson has brought an area of land into cultivation. On this area of land he is able to grow either potatoes or carrots, or a combination of both. Suppose, that if he spends 10 hours of his time he can produce either 100 kilos of potatoes, or 50 kilos of carrots. In that case both 100 kilos of potatoes and 50 kilos of carrots will have a Value equal to 10 hours. Put another way using Marx's value form we can express the value of potatoes in carrots, and vice versa.

If we express potatoes as the relative form of value then we would say 100 kilos of potatoes = 50 kilos of carrots. Carrots here are expressed as the equivalent form of value. But, we could equally have reversed this expression.

But, none of this tells us how many potatoes or carrots, Robinson actually will produce. He might be able to produce twice as many potatoes (100 kilos) as carrots (50 kilos) for the same expenditure of labour power, but if he does not like potatoes much, but loves carrots, he may well still devote all or most of his time to producing carrots rather than potatoes. So, his decision will be based on two different things, his preference for carrots as opposed to potatoes, and the relative Value of each i.e. how much of his time has to be devoted to producing one as opposed to the other. Marx says,

“Necessity itself compels him to apportion his time accurately between his different kinds of work. Whether one kind occupies a greater space in his general activity than another, depends on the difficulties, greater or less as the case may be, to be overcome in attaining the useful effect aimed at. This our friend Robinson soon learns by experience, and having rescued a watch, ledger, and pen and ink from the wreck, commences, like a true-born Briton, to keep a set of books. His stock-book contains a list of the objects of utility that belong to him, of the operations necessary for their production; and lastly, of the labour time that definite quantities of those objects have, on an average, cost him. All the relations between Robinson and the objects that form this wealth of his own creation, are here so simple and clear as to be intelligible without exertion, even to Mr. Sedley Taylor. And yet those relations contain all that is essential to the determination of value.”

Capital I, Ch. 1. Section 4

In other words, although the Labour Theory of Value is a theory of Objective Value, because it is based on the Law of Value, on the fact that the Value contained in various Use Values can be objectively measured, in looking at the way social labour-time is actually allocated the individual and collective preferences i.e. demand is determinant. If Robinson feels sick every time he looks at a potato, then, no matter how many of them he can produce relative to carrots (i.e. how low their value relative to carrots), he will still not choose to produce potatoes rather than carrots.

That basic law (The Law of Value) in relation to how social labour-time is allocated between the variety of possible activities applies to all societies, only the way it is manifest changes. In a slave owning society, the slave owners dictate what shall be produced and in what proportions to meet their own requirements. But, even there, the need to produce and to allocate a sufficient proportion of production to meet the requirements of the slaves – who form a part of the means of production – is required, or else the slave owners will find their slaves cannot work, die etc.

In a feudal society the individual peasant family determines its preferences, and then allocates its available time accordingly, as well as part of its time being devoted to doing the work that the feudal lord requires to meet their preferences. The totality of all these individual allocations of time forms the total product of the feudal society.

In a communist society, its members like the members of a peasant family or like Robinson on his island, will likewise determine their priorities and preferences for how they want to allocate the available social labour-time. But, once again, the Law of Value, will set the constraints within which those decisions can be taken. Marx says in the Critique Of The Gotha Programme,

“Here, obviously, the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values. Content and form are changed, because under the altered circumstances no one can give anything except his labour, and because, on the other hand, nothing can pass to the ownership of individuals, except individual means of consumption. But as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labour in one form is exchanged for an equal amount of labour in another form.”

This law which limits how much each individual can take out of the total social product in proportion to how much they have put into it, also limits how much of one type of production the society as a whole can enjoy as opposed to another. The society might, for example, be able to build 10 hospitals or 20 schools, but not both. Like Robinson deciding whether he liked potatoes or carrots compared with how much of his time is required to produce both, or like the peasant family deciding how much of its time to devote to producing food rather than spinning and weaving, this communist society would have to make a choice between these two alternatives based upon how much utility it felt it obtained from one rather than the other, compared to the value of one as opposed to the other. For example, if it felt that the utility of 10 hospitals was the same as 20 schools, it may decide to allocate its available labour-time equally, building 5 hospitals, and 10 schools.

In a capitalist society too this basic law applies, but in a modified form. Ultimately, it is the preferences of the society as a whole, which determine how the available social labour-time is allocated, but unlike all these other societies, where those decisions are taken directly by individuals (including where they do so collectively in a communist society) in a capitalist society they are taken indirectly via the market. Individual capitalists might decide to allocate their capital, and therefore, labour-time in a way that they see fit, but unless the commodities they produce are demanded by consumers, they will not be able to sell them, which means they will make no profit, which is their whole purpose.

But, whichever of these societies it is the basic relationship, and Law of Value continues to operate. A portion of society's time is devoted to producing means of consumption (required by the producers in order to live), a portion to producing means of production (required to increase productivity) and a portion is left over. What most clearly distinguishes these different societies is what happens to this portion left over – the surplus product.

In a slave owning society the slave owner simply appropriates the surplus product in the form of Use Values, over and above what is required to keep the slaves alive, and the other means of production repaired and replenished. The peasant's surplus product is appropriated by the feudal landlord in the form of rent, and by the clergy in the form of tithes, and by the feudal state in taxes.

In both these societies, the producers (slaves and peasants) hand over their surplus production (i.e. surplus to what is required for their own reproduction, and the reproduction of the means of production) to whoever forms the ruling class. For some peasants, it is possible to retain a portion of their surplus production, and use it for investment, which further enhances their production and surplus. This process leads to the “Differentiation of the Peasantry” described in detail by Lenin in his, The Development Of Capitalism In Russia. That leads to some of them becoming capitalist farmers.

But, the surplus product in a capitalist society is essentially no different to that in all of these other class societies. In just the same way, a proportion of society's total production, is required to meet the needs of the producers (i.e. the workers), another proportion is required to replace all of the means of production consumed in the production process. That leaves, a further proportion once more left over. Because all of the workers production belongs to the capitalists who employ them, this surplus product automatically belongs to, and is appropriated by those capitalists. The difference here is that unlike the slave owner or feudal landlord, who are seen openly to be appropriating a portion of the producer's output, the appropriation by the capitalists is hidden. That is because, under Capitalism everything takes the form of Money or Exchange Value rather than Use Value. It is not a certain amount of potatoes that the Capitalist appropriates, but a certain amount of money.

The slave is given back a proportion of their output to consume, by the slave owner. The peasant spends half the week producing to meet their own needs, and the other half meeting the needs of the landlord, clergy etc. The worker also only spends part of their time producing their own needs, the other part being appropriated by Capital, as profit, but it appears that the worker is being paid for all of their production. In reality, the wage that the worker is paid is equal to only a fraction of the value of their production, just as the slave gets back only a proportion of their production, and the peasant has to spend some of their time producing for the landlord.

Adam Smith and David Ricardo understood that Surplus Value was produced by Labour, but couldn't work out how. That is because they believed that what workers sold to Capital was Labour. Given that like Marx they determined Value in accordance with the Labour Theory of Value, which states that the Value of a commodity is determined by the labour-time required for its production, this left them with an insoluble contradiction. If a worker did 10 hours work, the commodity they produced would have a Value of 10 hours (say equal to £10). But, if the worker sold 10 hours of Labour to the Capitalist, this would also have a Value of £10, so no surplus value was possible.

By understanding that the situation of the worker was really no different than that of the slave, or the peasant described above, Marx resolved this riddle. What the worker sells to Capital is not Labour, but his Labour-power, his capacity to do work. The Value of that commodity – labour-power - as with every other commodity, is determined by the labour-time required for its production. That is the time required to produce the worker, which means to produce the food, clothes, shelter and so on those workers require to operate within the given society.

The labour-time required to produce all those things, as with the time needed to meet the needs of the slave or the peasant, are always less than the total amount of time the worker actually works. So, although the worker is actually paid, the value of the commodity they sell – labour-power – that value will always be less than the value the worker creates, thereby resulting in a surplus value incorporated in the worker's output, and directly appropriated by the capitalist.

As Nicholas Naseem Taleb put it in his book “The Bed of Procrustes”,

“Karl Marx, a visionary, figured out that you can control a slave much better by convincing him he is an employee.”