It follows on from the three previous volumes of Marx's Capital translated for the 21st Century.
The contents of Theories of Surplus Value, often called the Fourth Volume of Capital, were originally intended to be an historical excursus included alongside the contents of the other volumes of Capital. They describe the historical development of Political Economy, and were intended, therefore, to elaborate the basis upon which the theories of political economy were developed, and Marx's explanation of how those theories reflected changes in material conditions in society, and their reflection in social relations. In other words, it was intended as an elaboration of Marx's theory of Historical Materialism.
However, the contents of Theories of Surplus Value, itself running to three books, proved to be so extensive as to warrant its own separate attention. In many ways, therefore, as an historical exploration of the development of the theories of Political Economy, and how they reflected the ideas and interests of different social groups in society, Theories of Surplus Value is a better example of the application of Historical Materialism than is Capital itself.
In this book, Marx looks at the way the theories of the Mercantilists explained the wealth of nations by trade, and the appropriation of profits from unequal exchange. Its not surprising that these ideas are developed in those countries that did initially build their wealth on this basis, such as the Netherlands, and Britain, both of whom were trading nations, that developed large colonial empires from which they extracted wealth by such unequal exchange, long before they engaged in large-scale capitalist production. He moves on to examine the ideas of the Physiocrats. The Physiocrats, whose main base was in France, main area of study was the production relations in agriculture.
By studying agriculture, in which it is more obvious that surpluses are created in the sphere of production, not exchange, they were able to go beyond the ideas of the Mercantilists. The Mercantilists could explain profits at an individual level, as deriving from unequal exchange, but not at a general level, because such unequal exchange means that if everyone cheats each other, the profit of one is cancelled out by the loss of the other party to the exchange. The Physiocrats recognised that a general surplus can only arise in production. But, by studying agriculture they focused on its physical inputs and outputs, in which this creation of a surplus is most obvious. They defined value in these physical terms, and they saw the basis of the surplus as arising from a free gift of nature, and not from the surplus labour undertaken by the worker. The Physiocrats were studying capitalist development in agriculture in a transitional state from feudal agriculture. They justified landlords rents on the basis that it is the land that creates the surplus, and so the owner of the land is entitled to its product.
Adam Smith, built upon the work of the Physiocrats, taking their correct analysis that the surplus is created in production, not exchange, but swept away their concept of value based upon physical products, and defined value as labour, so that surplus value is then surplus labour.
Marx then builds upon these analyses, and sets out the definition of what constitutes productive labour. He asserts that it is what Adam Smith initially defines it as being, which is labour which exchanges with capital, and produces surplus value, which in turn can be accumulated as additional capital. This indeed is the basis of Adam Smith's own explanation of the wealth of nations, as deriving from this accumulation of capital that enables further production to take place, which in turn enables ever larger masses of profits to be produced. In the process, Marx also again examines the fallacy of Smith's argument that the value of commodities, and so of the national output resolves entirely into revenues – wages, profits, interest, rent and taxes. This fallacy, which is continued by economists down to today, fails to account for all of that component of output, which forms no revenue for anyone, but which must be simply set aside to replace all of the worn out machinery, the raw materials and so on that is consume in the production of the means of production themselves.
This fallacy. Which runs counter to Smith's original labour theory of value, which defines value on the basis of the quantity of labour required for production, leads Smith into irreconcilable contradictions. It leads him to develop a cost of production theory of value alongside his labour theory of value, and to develop a second theory of productive labour, based upon the production of value rather than surplus value, as well as a reversion to Mercantilist concepts in which he defines productive labour as that producing material rather than immaterial products or services. Smith's problems are compounded by the fact that he fails to distinguish between labour-power, as a commodity that is sold by wage labourers, and labour, the activity that itself creates value. He is unable, therefore, to explain how, on the basis of his labour theory of value, it can be that labour does not get paid wages equal to the value it creates. He concludes that when the means of production and land become owned by a class other than the actual labourers, the law of value ceases to operate. Labour is plentiful and capital is scarce so labour is sold below its value, and capital above its value. Its the prices of these factors production which then determine the value of commodities.
This, in fact, is the basis upon which later, neoclassical economic theory develops. It contains an inevitable circularity, because the value of commodities is determined by the prices of these factors of production, but the prices of the factors of production are in turn determined by the prices of commodities. The significance of Marx's analysis, here, is in terms of his analysis of the process of social reproduction. That is how society actually reproduces itself by reproducing the means of production consumed in production, the means of consumption required by workers so as to reproduce their labour-power, and finally the creation of a surplus product required not only to meet the consumption needs of the non-producers, but also to create the potential for accumulation so that society itself can develop. This process, however, is not just a process of economic reproduction, but also of social reproduction, because it reproduces the division of society into classes, into those that must labour, and those that appropriate the surplus produced by that labour. And, so Marx provides an objective basis of sociological analysis of society rooted in materialism in contrast to the subjectivist sociological theories, and superficial analysis of society as divided between rich, and poor etc. Rather than just describing such divisions, it explains the material basis for such division, and why given the historically determined productive relations, those social relations, must themselves be continually reproduced.
That is why Marx is able to reject all of the kinds of theories about redistribution of incomes and so on, which do not address the fundamental basis of the inequality of distribution, because they do not address the ownership of property, and specifically of capital, which is the cause of such unequal distribution. As part of analysing this process of reproduction, Marx examines in detail the remarkable work that the Physiocrats did in that regard, in the shape of Quesnay's Tableau Economique.
Finally, and pertinent to today's conditions, Marx examines a series of theories regarding money and the rate of interest. Marx demonstrates that contrary to the ideas that underpin Quantitative Easing, as well as Modern Monetary Theory, the rate of interest is not a price for money-but of money-capital. The rate of interest cannot be reduced by printing more money, but only by increasing the supply of money-capital relative to the demand for it. Printing additional money tokens or credit does not reduce the rate of interest, but devalues the tokens, thereby creating inflation, the most obvious example being the astronomical hyper inflation of asset prices that has occurred in the last 30 years.
As with the previous three books, an attempt has been made to bring the language and ideas contained in Marx's work into the 21st century, and to relate the subjects dealt with to current conditions and concerns.
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