Marx's Political Economy: Surplus Value and Commodity Production
3 The Generation and Accumulation of Surplus Value
Overview: Marx’s political economy begins with the analysis of the commodity to explain value, surplus value, and the generation/accumulation of capital. Volume I studies production of capital through the lens of surplus value. Surplus value arises when labor creates more value than the labor-power’s own value, enabling capitalists to extract profit.
Two phases of Marx’s studies: 1843–47 (engagement with political economy, German philosophy, French socialism leading to a Marxist worldview) and 1850–83 (focus on political economy, culminating in Capital). The three-volume Capital was finalized with Engels completing notes for volumes II and III.
Object of Volume I: study of the process of production of capital, using surplus value as the central concept.
Core sequence: to understand surplus value, one must understand value; to understand value, one must understand the commodity (the ‘elementary form’ of wealth in capitalist society).
The Commodity
A commodity = a good or service produced for exchange rather than for use. The use-value vs exchange-value distinction is secondary for defining a commodity; what matters is production for exchange.
Examples:
Rice grown to sell = commodity.
An orange grown for family consumption = not a commodity (not produced for sale).
A car produced for sale = commodity.
A haircut produced for sale (a service) = commodity (service can be a commodity
when produced for exchange).Care within a family for the elderly/young/sick is a service not a commodity; if bought on the market, it becomes a commodity.
Preliminary clarifications:
A commodity-producing society = a society where most production is organized through exchange (production for use is mediated by exchange when for social use).
Commodity-producing does not equal capitalism; exchange predates capitalism and existed in feudal and pre-feudal times. In those earlier periods, exchange was peripheral, not the central coordinating mechanism.
Social coordination in commodity-producing societies is achieved through exchange since private producers act independently with no planned coordination.
The domain of applicability of the concept of value is tied to exchange-mediated production; in non-exchange societies, the concept is not useful.
The commodity as the focal point for developing the concept of value; the labour-product (product of labour) takes the form of a commodity in a commodity-producing society.
Use Value, Exchange Value and Value
A commodity has two aspects:
Use value: the usefulness of the commodity (its physical properties and ability to satisfy needs).
Exchange value: the commodity’s ability to be exchanged for other commodities (its value as a medium of exchange).
Distinguishing qualitative and quantitative aspects of exchange value:
Qualitative: one commodity can be exchanged with every other commodity (universal drag-along feature).
Quantitative: exchange occurs in definite ratios (e.g., 1 chair = 10 shirts).
The source of exchange value: commonality among commodities, enabling exchange.
Classical tradition (Adam Smith, David Ricardo, Marx): commonality is that all commodities are products of human labour (labour theory of value).
Neoclassical tradition (Walras, Jevons, Marshall): commonality is usefulness/utility (subjective), a subjective theory of value.
Marx/ classical view: exchangeability arises because commodities are products of human labour; exchange value is a form expressible in labour-time; use value comes from material properties; the total labour time in society underpins value.
Labour theory of value (LTV): value of a commodity is proportional to the total labour-time socially necessary to produce it. Exchange value expresses this content; use value is the form of the commodity’s utility.
Synthesis: the commodity has two aspects—use value and value. Exchange value arises from the commodity’s embodiment of labour; use value arises from its physical properties.
The Aggregation and the Concept of Value
Marx extends the labour theory of value from single commodities to aggregate production (capital in general). The analysis abstracts from competition between capitals and divisions within labour to treat capital and labour as homogeneous blocks.
In the aggregate, long-run prices of production may diverge from values for individual commodities, but at the aggregate level (net national product) there can still be a value-equivalence with prices in the long run.
Two important clarifications on the labour–value link:
1) Qualitative aspect: what type of labour creates value? Marx distinguishes concrete labour from abstract labour and posits that abstract labour creates value.
2) The measurement and equivalence: value is tied to socially necessary labour-time; exchange balances labour across commodities so that the amount of labour embodied in exchanged commodities is preserved in long-run value equality.
Labour-Power and the Concept of Value
Labour-power: the capacity to do useful work (the commodity workers sell to capitalists).
Reproduction of labour-power:
Individual level: development of capacities through family upbringing, schooling, and workplace training.
Class level: continuous replenishment of the working class to maintain capitalist production; generational replacement is required.
The labour-power commodity straddles uses and exchanges: some components of labour-power are produced outside the capitalist commodity-production system (non-market), while others are produced within it (market).
Non-market vs market components of labour-power:
Non-market component: labour-power produced/reproduced outside capitalist commodity production (family, state, non-profit institutions).
Paid vs unpaid non-market labour: paid non-market labour is funded by tax and non-tax revenues; unpaid non-market labour is largely performed by women within households (Marxist–feminist perspective).
Market component: labour-power produced/reproduced within the capitalist system (private schooling, workplace training, goods and services purchased for reproduction: food, housing, clothing, healthcare, etc.).
The value of labour-power is conventionally defined as the socially necessary labour-time to produce and reproduce it (the value of the real wage bundle) – but the author adopts the unconventional approach to emphasize the wage share in national income and the social-productive process.
Two Definitions of the Value of Labour-Power
1) Conventional definition (Marx): the value of labour-power equals the value of the means of subsistence necessary for the maintenance of the owner (the wage bundle necessary to reproduce the worker and the worker’s family).
Key components in defining the “necessary means of subsistence”:
Determined historically, politically, and morally by the level of civilization, not biologically.
Must be adequate to reproduce not only the individual worker but the worker class over time (generational reproduction).
Must include the cost of education and training to develop required skills for capitalism.
This approach ties value of labour-power to a socially determined standard of living and education, not merely biological needs.
2) Unconventional definition (Foley and others): vlp = w/m, where w = money wage rate, and m = MEV (monetary expression of value, i.e., value of one hour of social labour).Example: 8-hour workday, daily wage $40 → wage rate w = $5/hour; MEV m = $10/hour of social labour; vlp = w/m = 5/10 = 0.5 hours of social labour per hour of labour-power sold.
Implication: vlp equals the share of social labour-time that the worker “gives back” through wage income; the numerator is the social labour-time equivalent of the wage, the denominator is the value created by one hour of social labour (taken as 1 unit).
The unconventional definition relates vlp to the wage share in national income: vlp = W/Y, where W is total wage income and Y is total value added (national income).
If prices were proportional to values, the two definitions would coincide; but when prices deviate from values (Volume III of Capital), they diverge. The unconventional approach remains useful for analyzing productivity and wage share, though it may obscure material living standards across different productivity contexts.
The wage share (W/Y) and vlp linkage:
Unconventional definition expresses vlp as the wage share in national income: vlp = W/Y.
This makes vlp sensitive to productivity; same wage share can imply different material living standards in countries with different productivity levels.
The transformation problem (values vs prices) becomes relevant when moving from Volume I/II to Volume III; the unconventional definition sidesteps some issues but does not eliminate them.
Comparison of the two definitions:
Conventional focuses on the bundle of subsistence goods necessary for reproduction (material standard of living).
Unconventional focuses on the wage share and productivity, linking value to macroeconomic aggregates (W and Y).
They coincide if prices are proportional to values and workers spend all income; they diverge otherwise. The author adopts the unconventional definition for its analytical advantages while acknowledging the intuitive appeal of the conventional approach.
Surplus Value and Exploitation
Surplus value arises when the value added by each unit of labour-power exceeds the value of that labour-power. In other words, the value created per hour by labour-power is greater than the value exchanged for that hour of labour-power.
The core condition: the value of labour-power must be less than unity for surplus value to exist in aggregate (value created per unit of labour-power is normalized to 1 unit; if vlp < 1, then value added per hour exceeds the cost of labour-power).
Per-hour accounting (simplified):
Let 1 hour of social labour create value = 1 unit.
Labour-power costs vlp units per hour (in value terms).
Surplus value per hour = 1 − vlp.
Therefore, surplus value arises from the exploitation of the working class (the gap between value produced and the value of labour-power consumed).
Visual metaphor: Figure 3.2 (Working Day, Marx’s division):
The working day is divided into paid labour time (variable capital, wages) and unpaid labour time (surplus value, profits).
From the perspective of social reproduction, this division corresponds to necessary labour (the means of subsistence) and surplus labour (producing surplus value).
The wage-form conceals the division between necessary and surplus labour, presenting all labour as paid.
Expanded analysis: non-market component of labour-power (Figure 3.3):
The total working day = wage labour (paid component funded by capital) + non-market labour (produced/reproduced outside commodity production).
Non-market component includes: work within state/non-profit sectors (paid via taxes) and unpaid housework within households (often done by women).
Social wage concept: the paid portion of non-market reproduction (paid leave, public health, education, housing, childcare) contributes to the social wage and thus to the valuation of labour-power.
The social wage equals the sum of the market wage and the paid portion of non-market labour-time that reproduces labour-power; the value of labour-power can be extended to include this social wage for broader analysis.
Three key elements in discussing labour-power valuation:
1) Constant capital (C): money used to purchase means of production; transferred to the finished commodity with no increment (in the simplifying assumption that means of production are used up in one cycle).
2) Variable capital (V): money used to purchase labour-power (wages).
3) Surplus value (S): profit; produced by unpaid labour during the working day; relevant for long-run capital accumulation.The conceptual importance of these elements lies in explaining how capital reproduces itself and how surplus value is extracted in a capitalist economy.
The scope of the labour-power concept: some of the labour-power is produced outside capitalist exchange (non-market) and some inside (market). This distinction matters for valuation and for understanding the social reproduction of labour-power.
Expenditure, Social Reproduction, and the Social Wage
The social wage concept expands the traditional wage concept to include the paid portion of non-market reproduction via public services and state provision.
The valuation of labour-power can be extended to include the social wage: vlp = (Social wage rate) / (MEV). This makes explicit how public goods and services contribute to the purchasing power and reproduction of the worker’s labour-power.
The long-run method (3.2.9 and beyond) continues to emphasize abstract labour as the core of value while acknowledging concrete labour’s role in production and reproduction.
The Theoretical Frame: Three Conceptions and Extrapolations
Constant capital (C) vs Variable capital (V) vs Surplus value (S) are central to the circuit of capital and the production of surplus-value in Marx’s framework.
The social division of the working day into necessary labour and surplus labour highlights exploitation as a systemic feature of capitalism, not a result of individual exploitation alone.
The wage-form masks the underlying social relations of production and social reproduction. The worker’s ability to reproduce labour-power (and the social wage) is crucial for understanding long-run capital accumulation.
Exploitation and Oppression
The concept of exploitation sits at the heart of Marxist analysis: capitalism rests on the exploitation of direct producers (the working class).
The chapter introduces two strands of analysis:
Analytical Marxist (AM) critique: a commodity theory of value (CTV) arguing that any basic commodity can serve as a basis for a consistent value theory; the rate of profit is positive iff the basic commodity is exploited.
The relationship between exploitation and oppression: beyond exploitation, various forms of oppression (racial, gender, caste, citizenship) intersect with economic relations.
The chapter also contends that exploitation does not rely on monopoly or monopsony power; competition in a capitalist economy can still support exploitation due to structural exclusions from productive resources.
8 Exploitation and Oppression: Qualitative Issues
A working definition (following Wright) for exploitation as a relational concept across groups: a relationship is exploitative if all three conditions hold:
Inverse interdependence of welfare: an increase in the material welfare of exploiters is at the expense of the exploited.
Labour appropriation: exploiters appropriate the labour or the fruits of labour of the exploited.
Exclusion: exploiters exclude the exploited from key productive resources of the economy.
These principles frame the identification of two broad social classes (fundamental social classes) defined by relations of production (power over means of production and labour-power).
Forms of oppression (non-exploitative and exploitative):
Expropriation oppression: benefits at the expense of another group without labour appropriation (e.g., colonial expropriation of land from indigenous populations).
Distributive injustice oppression: benefits at the expense of another group due to systemic advantages in income, wealth, resources, and political power (e.g., caste, race, gender, citizenship, language).
Exploitative oppression: both exploitation (labour appropriation) and distributive injustice (systemic advantages) coexist; for example, the modern capital-labour relation where the capitalists appropriate surplus labour and social structures reinforce group-based inequality (e.g., race and caste hierarchies).
The centrality of exclusion: exclusion from access to productive resources is a fundamental mechanism enabling exploitation; voluntary actions (like helping a neighbor) do not constitute exploitation because they lack coercive structural constraint and exclusion.
Market power is not essential for exploitation: competitive capitalism can generate exploitation; monopoly power intensifies certain forms of exploitation but is not a prerequisite.
The discussion links qualitative analysis of exploitation to quantitative dimensions, foreshadowing the subsequent discussion of measurement of exploitation.
8.1 Qualitative Issues and 8.1.2 Quantitative Angle
The qualitative framework provides a rigorous basis for identifying exploitative relations, including the role of exclusion and the appropriation of labour.
The quantitative angle (to be developed further in the text) seeks to measure exploitation, but the qualitative criteria alone already establish capitalism as an exploitative system according to the author’s reading.
Key Formulas and Concepts (LaTeX)
Value of Labour-Power (unconventional definition): vl_p = rac{w}{m}
w: money wage rate per hour
m: MEV, the Moneta ry Expression of Value (value of one hour of social labour)
Example: If the day is 8 hours, daily wage is $40, wage rate is $5/hour, MEV = $10/hour:
vl_p = rac{5}{10} = 0.5 ext{ hours of social labour per hour of labour-power}Surplus value per hour (per hour of labour-power): S = 1 - vl_p ext{ (per hour of social labour)}
Here, value created per hour is normalized to 1 unit; surplus value per hour is the remainder after paying labour-power's value.
Conventional vs Unconventional definitions of vl_p:
Conventional: vl_p = value of the means of subsistence for the average worker (the bundle consumed per hour).
Unconventional: vlp = vlp = rac{W}{Y}
where W is total wage income and Y is total value added (national income).
Social wage (expanded valuation): the paid portion of non-market labour included in public provision (e.g., paid parental leave, public housing, public health care, public education).
In a broader definition, vl_p could be linked to the social wage:
Objectively, capital, in economics, refers to any assets (money, goods, equipment, buildings, or other resources) used in the production of goods or services. It is one of the three basic factors of production (the others being land and labor).
Key characteristics and elements of capital include:
Assets for Production: Capital goods are those used to produce other goods and services, rather than being consumed directly. Examples include machinery, factories, and tools.
Investment: Capital is typically accumulated through investment, where resources are allocated from current consumption to future production.
Generation of Income/Profit: The purpose of employing capital is to generate future income or profit. This aligns with the idea, even in Marxist theory, that capital seeks to expand value.
Financial vs. Physical Capital: It can refer to financial capital (money and other financial assets that can be used to acquire physical capital) or physical capital (the actual tools, machines, and infrastructure).
While the previous discussion centered on Karl Marx's view of capital as a social relation and a process of value expansion driven by the extraction of surplus value from labor, the objective economic definition broadly encompasses productive assets and
In the context of Marx's political economy, capital is not merely a static sum of money, but a social relation and a process of value in motion that aims to generate and accumulate surplus value. It represents value that is constantly expanding through the exploitation of labor-power in the production process.