The Generation and Accumulation of Surplus Value
3 The Generation and Accumulation of Surplus Value
Chapter context: Marx’s political economy and the path to Capital; two phases of Marx’s study (1843–47 and 1850–83); dialectical method and historical materialism as guiding ideas; Capital in three volumes; Engels published volumes 2 and 3 from Marx’s notes; Volume 1 focuses on the process of production of capital and the generation/accumulation of surplus value.
Objective in Volume 1: understand surplus value as the core of how capital generates and accumulates wealth; need to understand value and the commodity to grasp surplus value.
Starting point: the commodity as the elementary form of wealth in capitalist societies.
The Commodity
A commodity is any good or service produced for exchange rather than for use.
The distinction between a good and a service is irrelevant for the property of being a commodity.
A service can be a commodity if produced for exchange (e.g., a haircut).
Examples:
Rice produced for sale -> commodity.
Orange grown for family consumption -> not a commodity (not produced for sale).
A car produced for sale -> commodity.
Care services produced for sale (a haircut) -> commodity (a service that is commodity).
Household care for the elderly/young/sick provided within a family -> non-commodity; would become a commodity if purchased from the market.
Two preliminary issues to clarify:
The relationship of exchange to capitalism and the proper domain of study of commodity production.
By a commodity-producing society, Marx means a society where most production is organized through exchange; the product of labour (labour-product) takes the form of a commodity.
Commodity-producing society vs capitalism:
Exchange existence is a necessary condition for capitalism but not sufficient; an additional condition is required to convert a commodity-producing society into a capitalist one.
Commodity production is not coterminous with capitalism; historically, exchange existed in pre-feudal, feudal times, but production was largely non-commodity and self-sufficient.
A commodity-producing society is a conceptual construct useful for understanding properties of the commodity and aspects of exchange; its concepts apply where production is organized through exchange.
What does it mean that social production is organized through exchange?
In a commodity-producing system, most production is carried out by private entities acting independently, with no conscious coordination of production plans.
Social coordination is necessary for survival (food, clothing, shelter; replacement of worn-out means of production; matching supply and demand).
The process of exchange becomes the mechanism of social coordination of production; central to commodity-producing societies.
Conceptual demarcation:
The domain of applicability of the concept of value is limited to societies where production is organized through exchange.
Value cannot be applied to societies where production is not for exchange (pre-feudal, feudal, socialist contexts in various forms).
Summary: we study a commodity-producing society to investigate the properties of commodities and to lay the groundwork for the concept of value; value arises from the labour embodied in commodities.
Use Value, Exchange Value and Value (3.1.1)
A commodity has two aspects:
Use value ( usefulness of the commodity in satisfying a want or need).
Exchange value (the commodity’s exchangeability with other commodities).
Use value is grounded in the physical properties of the thing; exchange value cannot be derived from physical properties alone, since vastly different objects (chair, shirt, haircut) all have exchange value.
Qualitative vs quantitative aspects of exchange value:
Qualitative: one commodity can be exchanged with every other commodity (universal exchangeability).
Quantitative: exchange ratios in definite proportions (e.g., 1 chair for 10 shirts).
Aristotle’s insight: exchange requires commensurability, a common standard, to be possible.
Two classical answers to what accounts for exchangeability:
Classical tradition (Adam Smith, David Ricardo, and Karl Marx): exchangeability arises because all commodities are products of human labour.
Neoclassical tradition (Walras, Jevons, Marshall): exchangeability arises from the usefulness or utility of goods; exchange is based on subjective value.
Marx/ classical view (left intact here): use value is subjective and varies; labour involved in production is the objective basis for value.
Labour theory of value (LTtv) rough outline:
A commodity’s value arises from the total labour time socially necessary to produce it.
The magnitude of value is proportional to the total labour time embedded in the commodity.
Exchange value is a form of expression of value: exchange value reflects the underlying value, which is grounded in labour.
Key clarifications from Volume I (as developed by Marx):
LTtv applies to aggregate production of commodities (capital in general), not to individual commodities in isolation.
When moving to Volume III, prices of production may diverge from values due to competition among capitals, though the aggregate value concept remains central.
Two groups of clarifications (qualitative and quantitative) refine how value and labour relate:
Qualitative: what kind of labour creates value? Distinguish concrete labour (the particular task) from abstract labour (the socially necessary labour that creates value).
Abstract labour is the source of value; concrete labour is heterogeneous, but value lies in the abstract common essence.
Value, price, and the long-run framework:
The analysis abstracts from individual capitals and commodities to consider capital as a whole; this is essential for the concept of value in the aggregate.
In Volume I, long-run prices of production may differ from values for individual commodities, but value remains the guiding category at the aggregate level.
The Labour Theory of Value and its two crucial differences from earlier classical thinkers (3.1.2 Qualitative Aspects of Value)
Difference 1: Aggregation level – value is defined for aggregate output (capital in general) rather than for individual commodities; long-run prices may deviate but aggregate value holds.
Difference 2: The link between labour and value – clarifications on type of labour that creates value, and how to compare value across different kinds of labour; introduction of concrete vs abstract labour and the assertion that value is created by abstract labour.
Labour Power as a commodity (3.3.3)
Labour-power is the capacity to do useful work, embodied in the worker; it is a commodity sold by workers to capitalists.
Reproduction of labour-power occurs at multiple levels: within the individual worker (development in family, schooling, workplace training) and within the working class as a whole (generation-to-generation replacement).
The labour-power stock is developed through three sites: family, schooling (formal or informal), and workplace training.
The continuous capitalist process requires replacement of workers who exit the labour force due to retirement, aging, or death; this generation of new workers is essential to capitalism’s continuity.
Distinguish between non-market and market components of labour-power production and reproduction:
Non-market component: labour-power produced outside the logic of commodity production (within households or non-capitalist institutions).
Market component: labour-power produced within the capitalist system (private schooling, workplace training, and the purchase of goods and services necessary for reproduction within the market).
Subcomponents within non-market labour-power:
Paid non-market component: produced in state and non-profit institutions and financed by tax revenues (income from wage and profits).
Unpaid non-market component: produced within the working-class household; largely undertaken by women; not directly paid in the market and not readily imputable as value in the standard measure.
Market component includes commodities purchased for reproduction (food, housing, clothing, medical care, etc.) and services provided within the market (private schooling, private training, etc.).
Demarcating between paid and unpaid parts is crucial for valuation; the unpaid household labour is typically excluded from the conventional valuation of labour-power to maintain the distinction between concrete and abstract labour, though some strands of Marxist–feminist scholarship argue for including household labour in a broader social accounting.
Two definitions of the value of labour-power:
Conventional: the value of the bundle of means of subsistence consumed by the average worker per hour of labour-power sold. This captures the rate of reproduction of the worker in terms of the basket of goods and services consumed.
Unconventional (Foley’s approach): defined as the ratio of the money wage rate to the MEV (monetary expression of value), i.e.,
v{lp} = rac{w}{MEV} and, equivalently, as the wage share in national income v{lp} = rac{W}{Y}
where W is total wage income and Y is total value added (the monetary value of socially necessary labour-time).MEV (Monetary Expression of Value) is the money embodiment of each hour of social labour-time in commodity production.
Converting between the two definitions (conventional vs unconventional):
The conventional approach emphasizes a specific basket of goods that constitutes subsistence for the worker.
The unconventional approach emphasizes labour productivity and the share of national income allocated to wages; when prices equal values (in the abstract framework of Volume I/II), both definitions coincide; when prices deviate (Volume III), they diverge.
Why adopt the unconventional definition in this text:
It inherently ties the value of labour-power to both productivity and real wage, and it helps interpret the value of labour-power as the wage share in national income.
It allows for a consistent linkage to the social wage (public provision) and to the broader social accounting, including education, training, and public services.
Two key caveats of the unconventional definition:
The same value of labour-power in different countries can correspond to very different material living standards due to different levels of productivity.
Prices deviate from values in Volume III, which can distort the relationship between the wage share and the embodied labour-time.
The conventional and unconventional definitions converge when prices are proportional to values and all income is wages (i.e., no profits or capital incomes distort the wage share).
Surplus Value and Exploitation
Surplus value arises when the value added by labour-power in production exceeds the value of labour-power itself.
A simple accounting perspective: if the value of labour-power is less than unity (assuming unit value for labour performed in production), then the value added by one hour of social labour is greater than the value returned to the worker per hour sold, creating surplus-value for the capitalist.
Two ways to see surplus value:
As the difference between the unity value of output created per hour of labour and the value of the labour-power input.
In terms of the social labour-time: the difference between the total value created by labour and the value of labour-power purchased by capital per hour.
Visual metaphor of the working day (Figure 3.2) and its expansion to include non-market labour-power (Figure 3.3):
The working day is divided into paid labour time (necessary labour) and unpaid labour time (surplus labour) from the perspective of the value created and the wage paid.
The wage-form hides the division between necessary and surplus labour; it presents all labour as paid, obscuring exploitation.
The expanded figure accounts for the non-market component of labour-power, showing that social reproduction requires more labour than is captured by capitalist accounting, leading to the concept of the social wage.
The concept of the reserve army of labour (relative surplus population) helps to explain the persistence of surplus labour under capitalism by supplying a pool of unemployed or underemployed workers.
Terminology and Three Ratios (3.3.4)
Constant capital (C): the value of the means of production used up in production; the capital advanced to purchase the means of production.
Variable capital (V): the value of labour-power purchased by the capitalist; money wages paid to workers.
Surplus value (S): the value added beyond the cost of labour-power; profits and related earnings to the capitalist.
In the standard circuit, the total money at the start is allocated to purchase C and V, and surplus value emerges from the excess of value created by labour over the value of labour-power.
The relationship can be summarized as:
Initial money M is divided into C (constant capital) and V (variable capital).
Value created during production exceeds V, yielding S (surplus value).
Exploitation and Oppression (Chapter 8)
Core claim: capitalism rests on the exploitation of the direct producers (the working class).
The Analytical Marxist critique (CTV) challenges LTtv by arguing that a basic commodity could serve as the substance of value; the rate of profit would be positive if and only if that basic commodity is exploited.
The discussion integrates exploitation with broader forms of oppression, including distributive injustices and expropriation across identity lines (caste, race, gender, citizenship, etc.).
Key questions: what is the relationship between exploitation and oppression, and what are the ethical, philosophical, and practical implications?
8.1 Theories of Exploitation (Qualitative Issues)
Definition of exploitation (two criteria, following Wright):
Inverse interdependence of welfare: an increase in the material welfare of exploiters depends on a decrease in the welfare of the exploited.
Labour appropriation: the exploiters appropriate the labour or the fruits of labour of the exploited.
Exclusion principle: exploiters can appropriate labour because the exploited are excluded from access to key productive resources.
The exploitation relationship is fundamentally a relationship between groups defined as classes; individuals act as representatives of these groups.
Forms of oppression can be categorized as:
Exploitative oppression (class-based): where exploitation and exclusion are linked to the economic structure (capital vs labour).
Non-exploitative oppression: expropriation (without labour appropriation) and distributive injustice (group-based advantages in distribution of income/wealth).
Oppression of expropriation (non-exploitative): e.g., colonial expropriation where one group benefits from productive resources without labor appropriation.
Oppression of distributive injustice (non-exploitative): group-based advantages in power over income, wealth, resources; examples include caste, race, ethnicity, gender, citizenship, language, etc.; these overlays interact with capitalism but do not erase the basic capital-labour relation.
Exploitative oppression (the combination of exploitation and exclusion): the exploiters depend on the labour of the exploited; the exclusion from productive resources is structural and essential.
The centrality of exclusion: exclusion from access to productive resources is a crucial mechanism enabling exploitation; voluntary exchange cannot explain this structural constraint.
Market power vs exploitation: exploitation does not require monopoly power; it exists even in competitive capitalism; curbing monopoly would not eliminate exploitation.
The qualitative discussion shows exploitation exists, even if it is difficult to quantify; the quantitative treatment will be addressed in the next section, but qualitative reasoning already establishes capitalism as an exploitative system.
The broader political-ethical implications: exploitation is linked to oppression and distributive injustices beyond class; struggles against these oppressions involve contesting expropriation, inequality, and the distribution of power and resources.
8.1.1 Qualitative Issues (continued)
The discussion emphasizes that exploitation is a relation, not a property of individuals; it defines two groups (fundamental social classes): capitalists and workers; and it anchors exploitation in the structure of production and social institutions.
The analysis is careful to separate exploitation (the economic relation) from other forms of oppression; though interconnected, they require different kinds of analysis and policy responses.
The next step (not fully covered here) turns to the quantitative measurement of exploitation, which will be explored after the qualitative foundations are laid.
Notable equations and concepts (summarized)
Value, in the classical-Marxian sense, is the socially necessary labour-time required to produce a commodity.
Commodity has two aspects: Use value and Exchange value. The exchangeability of commodities is grounded in their being products of labour (LTtv perspective).
Value is realized and exchanged via the labour process; total value in capitalist production can be analyzed at the aggregate level (capital in general).
Value of labour-power (three representations):
Conventional definition: value of the means of subsistence necessary for the worker’s reproduction per hour of labour-power sold.
Unconventional definition (Foley):
v_{lp} = rac{w}{MEV} = rac{W}{Y}
where w is the money wage rate, MEV is the Mon–etary Expression of Value, W is total wage income, and Y is total value added (national income).
The difference between the value added by labour and the value of labour-power input yields surplus value per hour: if the value added per hour is unitary (1) and the value of labour-power per hour is v{lp} < 1 , then there is surplus value per hour: SV = 1 - v{lp} .
The non-market vs market components of labour-power reproduction: non-market labor-power is produced outside commodity production (household, state, non-profits), while market labor-power is produced within the capitalist system (schools, training, market goods/services).
Social wage concept: the paid component of non-market labour-power (e.g., public services financed by taxation) plus the market wage; used to expand the measurement of the value of labour-power beyond monetary compensation alone.
Central claim: exploitation rests on the exclusion of workers from access to the means of production; this exclusion makes possible the appropriation of labour and thus the extraction of surplus value.
Reserve army of labour (relative surplus population): a structural mechanism that ensures a pool of workers available to be employed, stabilizing the exploitation structure.