Having explained the origins of profit, and the means by which the capitalists increase these profits, Marx now delves further into the question of surplus-value and looks also at the issue of wages. The conclusion is clear: within the capitalist system – a system of wage labour and capital – the benefits of scientific, technological, and industrial progress will always overwhelmingly flow towards the capitalists.
Productive and unproductive labour
Marx begins his further analysis of surplus-value by looking at the development of the labour process and examining the question of productive and unproductive labour. The history of the labour process is one that flows from the individual to the social; from the particular to the general. The labour process is transformed from that of private individuals to that of a social, collective process. “The product is transformed from the direct product of the individual producer into a social product, the joint product of a collective labour.” (Karl Marx, Capital, Volume One, Penguin Classics edition, p643)
This transformation from the individual to the collective, in turn, Marx explains, involves a change in the concept of what is deemed to be “productive” labour. Under capitalism, where production is a social process, conducted in the name of profit, the question of productivity can no longer be seen from the perspective of the individual labourer, but must be analysed from the perspective of capital itself. Since the purpose of capital is to create surplus-value, the worker under capitalism can only be deemed productive if he/she is able to generate surplus-value – to create a surplus of products, above and beyond that needed by labour itself.
“Capitalist production is not merely the production of commodities; it is, by its very essence, the production of surplus-value. The worker produces not for himself, but for capital. It is no longer sufficient, therefore, for him simply to produce. He must produce surplus-value. The only worker who is productive is one who produces surplus-value for the capitalist, or in other words contributes towards self-valorisation of capital...
“The concept of a productive worker therefore implies not merely a relation between the activity of work and its useful effect, between the workers and the product of his work, but also a specifically social relation of production, a relation with a historical origin which stamps the worker as capital’s direct means of valorisation. To be a productive worker is therefore not a piece of luck, but a misfortune.” (p644)
This important distinction between productive and unproductive labour under capitalism – a scientific distinction made on the basis of a materialist analysis of social, class relations – helps to explain and understand the actions of the capitalists today and the instability of the capitalist system itself. On the one hand we see the drive by the capitalists to create new markets for exploitation through privatisation and outsourcing. On the other hand, we see also the extremely unstable foundations of British capitalism, which has for decades based itself on the completely unproductive and parasitic financial sector – a sector that, instead of generating surplus-value, merely creates bubbles of fictitious capital by attempting to make money from money.
To be productive with capitalism, then, a worker must not only be able to produce a surplus, but must do so in relation to capital – to generate surplus-value. This requires a certain level of development in the productive forces to be reached, such that the needs of the worker can be met in the course of a day’s labour, whilst still leaving time for the creation of further commodities to be exchanged on the market. This, then, the development of productivity to a certain necessary level, as explained by Engels also in his Origins of the Family, Private Property, and the State, is the prior condition to class society – to the maintenance of an elite minority at the expense of an exploited majority.
“If the worker needs to use all his time to produce the necessary means of subsistence for himself and his family, he has no time left in which to perform unpaid labour for other people. Unless labour has attained a certain level of productivity, the workers will have no such free time at his disposal, and without superfluous time there can be no surplus labour, hence no capitalists, as also no slave-owners, no feudal barons, in a world no class of large-scale landed proprietors.” (p646-647)
The task facing the capitalists is to set about increasing this surplus-value created, either in absolute terms – by increasing the overall length of the working day – or in relative terms – by shortening the necessary labour time relative to the fixed length of the working day, i.e. by reducing the time it takes for the worker to create commodities with equal value to those required to meet his/her own needs.
“The prolongation of the working day beyond the point at which the worker would have produced an exact equivalent for the value of his labour-power, and the appropriation of that surplus labour by capital – this is the process which constitutes the production of absolute surplus-value...In order to prolong the surplus labour, the necessary labour is shortened by methods for producing the equivalent of the wage of labour in a shorter time. The production of the absolute surplus-value turns exclusively on the length of the working day, whereas the production of relative surplus-value completely revolutionises the technical processes of labour and the groupings into which society is divided.” (p645)
The progressiveness of capitalism in its heyday was based on its ability to develop the productive forces by reinvesting profits into new technologies and techniques in an attempt to increase productivity and thus increase relative surplus-value. Earlier modes of production – such as slavery or feudalism – were not conducive to such a drive for increased productivity. Why would a slave-master invest in new machinery and tools when he / she had access to an abundance of cheap labour in the form of slaves? Similarly for the case of the feudal lord and the peasant. And how could the collective process of production be developed and economies-of-scale be achieved under the conditions of petty production – of individual, atomised, and isolated labour – that existed prior to capitalism in societies based on small-scale peasant economies and cottage industries? As Marx and Engels comment in the Communist Manifesto:
“The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air; all that is holy is profaned; and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.”
Productivity, intensity, and the working day
Marx spends Chapter 17 analysing the relationship between the working day, the intensity of labour, and the productivity of labour, and the effect these variables have on the relative magnitudes of the surplus-value generated and the price paid for labour-power – i.e. wages.
Marx draws an important distinction between the productivity of labour and the intensity of labour. An increase in either will result in a greater mass of commodities being created within a given space of time. However, with an increase in the intensity of labour, this greater mass of use-values is accompanied by a greater total amount of value created in the course of a given period of time. This arises from the fact that value (exchange-value) is based on the amount of socially necessary labour time – the labour time required to produce a commodity for a given social average intensity of labour. With an increase in productivity, however, a greater mass of commodities – of use-values – is accompanied by a decrease in the value of these commodities, since the socially necessary labour time required to produce each commodity is now, on average, reduced.
For a given length of the working day and intensity of labour, the capitalist can only increase profits by increasing the relative surplus-value generated, and this means increasing the productivity of labour. The effect of increased productivity, as explained previously, is to reduce the time taken to produce the commodities that are required for the maintenance of the working class – in other words, to reduce the value of labour-power itself, and thus increase the ratio of surplus labour time to necessary labour time.
Marx importantly notes, however, that, “It is the value and not the mass of these means of subsistence that varies with the productivity of labour.” It is possible, therefore, “that owing to an increase in the productivity of labour both the worker and the capitalist may simultaneously be able to appropriate a greater quantity of means of subsistence, without any change in the price of labour-power or in surplus-value.” (p659)
This is the basis behind the argument that “wealth trickles down” – the justification for the capitalist system given by its own apologists, who reassure us that “a rising tide lifts all boats”. It is true, as Marx points out, that, thanks to an increase in the productivity of labour, the living standards of both the worker and the capitalist can increase. In this sense, the “real wages” of the worker – that is, the basket of goods that the worker can purchase with his/her wages – may improve over time. But, as Marx goes on to explain, the “relative wages” of the worker – the share of the total wealth in society going to labour – will nevertheless decrease.
“In this way it is possible, given increasing productivity of labour, for the price of labour-power to fall constantly and for this fall to be accompanied by a constant growth in the mass of the worker’s means of subsistence. But in relative terms, i.e. in comparison with surplus-value, the value of labour-power would keep falling, and thus the abyss between the life-situation of the worker and that of the capitalist would keep widening.” (p659)
This is situation society finds itself in today, with capital everywhere taking an ever larger share of the pie, and with growing inequality between rich and poor in all countries. Hence the popularity of authors such as Thomas Piketty, who, in his magnum opus entitled Capital in the 21st Century, discusses the inherent tendency within capitalism towards an ever increasing gap between capital and labour. What’s more, as a result of the crisis and the downward pressure on wages due to mass unemployment and the competition between workers for jobs, it is not only relative wages that have decreased – real wages, and even nominal wages, have decreased for many workers in the advanced capitalist countries too.
The bourgeois commentators today have noted the decline in wages, and frequently assert that the way to reverse this situation is for businesses to invest in new machinery, technology, and research and development, and thus increase productivity. In this way, as explained above, the capitalists can increase real wages, whilst still ensuring that profits rise also.
This is all well and good; the glaring problem is, however, that the capitalists at the current time are unwilling and unable to invest – in fact, investment in the advanced capitalist countries is at historic lows. Big business is sitting on piles of idle money, which is merely being lent to households and fuelling further credit bubbles, rather than being reinvested to develop the productive forces. The global capitalist system is awash with excess capacity and a glut of commodities that cannot be sold; and it is this enormous contradiction of overproduction which means that productivity is not rising, for to invest and increase productivity would mean to produce even more commodities that need to be sold on an already saturated market. This, more than anything, demonstrates the fundamental barrier to development that private ownership, competition, and production for profit have become.
Under capitalism, we see that increases in productivity, far from increasing living standards and reducing the length of the working day, are only used to increase profits for the capitalists. This enormous contradiction – of ever increasing technology and technique at society’s disposal alongside growing toil and unemployment for workers and youth – demonstrates the monstrous limitations of the capitalist system. Why can’t the work in society be shared out to eliminate unemployment and reduce the hours of the working day for all? Why can’t the technology and resources in society be used to increase living standards and leisure time for the mass of people?
“Only the abolition of the capitalist form of production would permit the reduction of the working day to the necessary labour-time. But even in that case the latter would expand to take up more of the day, and for two reasons: first, because the worker’s conditions of life would improve, and his aspirations become greater; and second, because a part of what is now surplus labour would then count as necessary labour, namely the labour which is necessary for the formation of a social fund for reserve and accumulation.” (p667)
The existence of this contradiction – with mass unemployment existing simultaneously to those who must work in two-or-three jobs just to get by – also answers the completely fallacious argument put forward by the apologists of capitalism in claiming that it is the most “efficient” of all economic systems. As Marx notes, in reality capitalist is the most inefficient and wasteful of systems, with millions lying idle in unemployment because the capitalists cannot find a profitable use for their labour, whilst stockpiles of goods are accumulated and destroyed because they cannot be sold on a market that is beyond saturation due to the enormous excess capacity and overproduction that exists on a world scale.
“The capitalist mode of production, while it enforces economy in each individual business, also begets, by its anarchic system of competition, the most outrageous squandering of labour-power and of the social means of production, not to mention the creation of a vast number of functions at present indispensable, but in themselves superfluous.” (p667)
Wages: the price of labour-power
Marx then moves onto the question of wages, exploring how it is that they are determined, and how this expresses itself in the real world of capitalist production. The most important clarification is that wages are merely the price for a commodity – the commodity of labour-power, which the worker sells to the capitalist in a transparent exchange on the market.
Like the price of all other commodities, wages will oscillate due to supply and demand: where there is an abundance of workers, but only limited opportunities for employment, the capitalists will be in a position of power to make workers compete against each other, and wages will be pushed down. Vice-versa, when the economy is booming and there is full employment, the demand for workers can be high enough to push wages upwards. This was largely the case in the post-war period, where migrant workers were actually encouraged to come to Britain from its colonies in order to provide a greater abundance of labour-power. Similarly, in such periods, as discussed previously, the capitalists will use the threat of replacing workers with machines to drive down wages also. On the other side, where workers are organised, with strong trade unions, higher wages can be won.
Importantly, however, like the price of all other commodities, wages will – in the absence of any restrictions – only oscillate around a “natural price” – that is, around the value of the commodity itself, the value of labour-power. And like all other commodities, the value of labour-power, as explained previously, is determined by the socially necessary labour time needed to produce this commodity. In the case of labour-power, this means the average labour time necessary to produce the means of subsistence for the working class and their families: food, shelter, clothing, healthcare, education, etc. – the level of which is socially and historically determined, varying both in time and space.
“If demand and supply balance, the oscillation of prices ceases, all other circumstances remaining the same. But then demand and supply also cease to explain anything. The price of labour, at the moment when demand and supply are in equilibrium, is its natural price, determined independently of the relation of demand and supply. It was therefore found that the natural price was the object which actually had to be analysed.
“...As with other commodities this value was then further determined by the cost of production. But what is the cost of production....of the worker, i.e. the cost of production of producing or reproducing the worker himself?” (p678)
In posing such a question, Marx highlights an important distinction within capitalism and wage-labour: wages do not represent the price of labour, but the price of labour-power. Workers do not sell their labour to the capitalist – i.e. the actual work they perform or the commodities they produce; rather, they sell their labour-power – i.e. their ability to work for a certain period of time. It is then up to the capitalist to extract as much labour from the worker within this time.
“It is not labour which directly confronts the possessor of money on the commodity-market, but rather the worker. What the worker is selling is his labour-power. As soon as his labour actually begins, it has already ceased to belong to him; it can therefore no longer be sold by him. Labour is the substance, and the immanent measure of value, but it has no value itself.” (p677)
Labour, then, has no value, but is what generates value. As Marx explains, to talk about the “value of labour” is tautological, for value is nothing more than general labour – socially necessary labour time. There is a clear difference between the commodity (labour-power) and the function, i.e. use-value, of that commodity (labour). In the case of the worker, “the use-value supplied by the worker to the capitalist is not in fact his labour-power but its function, a specific form of useful labour, such as tailoring, cobbling, spinning, etc. That this same labour is, on the other hand, the universal value-creating element and thus possesses a property by virtue of which it differs from all other commodities, is something which falls outside the frame of reference of the everyday consciousness.” (p681)
“...what they [the classical political economists] called the ‘value of labour’ is in fact the value of labour-power, as it exists in the personality of the worker, and it is as different from its function, labour, as a machine is from the operations it performs.” (p678)
As Marx explains, by creating a confusion between labour and labour-power, the system of wage-labour hides from view the exploitation of the worker. Any clear distinction in the working day between the necessary labour and the surplus labour disappears. It appears that the worker is simply paid “a fair day’s pay for a fair day’s work”.
“The wage-form thus extinguished every trace of the division of the working day into necessary labour and surplus labour, into paid labour and unpaid labour. All labour appears as paid labour.” (p680)
This was not the case in feudal times: the peasant would work on the land that belonged to his/her lord; for a certain number of days they were producing for the landlord, whilst for the other days they were working for their own maintenance. In ancient times, under slavery, the exploitation is even more transparent, as Marx comments:
“In slave labour, even the part of the working day in which the slave is only replacing the value of his own means of subsistence, in which he therefore actually works for himself alone, appears as labour for his master. All his labour appears as unpaid labour. In wage-labour, on the contrary, even surplus labour, or unpaid labour, appears as paid. In the one case, the property-relation conceals the slave’s labour for himself; in the other case the money-relation conceals the uncompensated labour of the wage-labourer.”
“We may therefore understand the decisive importance of the transformation of the value and price of labour-power into the form of wages, or into the value and price of labour itself. All the notions of justice held by both the worker and the capitalist, all the mystifications of the capitalist mode of production, all capitalism’s illusions about freedom, all the apologetic tricks of vulgar economics, have as their basis the form of appearance discussed above, which makes the actual relation invisible, and indeed presents to the eye the precise opposite of that relation.” (p680)
Time-wages and piece-wages
Marx then develops his analysis of wages by exploring the different forms in which wages are paid, in particular the difference between time-wages and piece-wages. Time-wages are simply wages based on a set amount for a certain period of time, e.g. per hour; piece-wages, meanwhile, are wages based on the actual output of the worker.
As explained above, the wage-form hides the exploitation of the worker. In the case of time-wages, we see that by paying an hourly rate, the capitalist helps to conceal the division between necessary and surplus labour. Yet an hourly rate can still be determined. “The unit of measurement for time-wages, the price of the working hour, is the value of a day’s labour-power divided by the number of hours in the average working day.” (p685) This use of an hourly rate, in turn, allows the capitalist to exploit workers even more:
“Since this unit is determined by the ratio of the daily value of labour-power to the working day of a given number of hours, it naturally loses all meaning as soon as the working day ceases to contain a definite number of hours. The connection between the paid and the unpaid labour is destroyed. The capitalist can now wring from the worker a certain quantity of surplus labour without allowing him the labour-time necessary for his own subsistence. He can annihilate all regularity of employment, and according to his own convenience, caprice, and the interest of the moment, make the most frightful over-work alternate with relative or absolute cessation of work.” (p686)
We see this form of brutal exploitation clearly today, where work is increasingly of a precarious and temporary nature. This finds its most acute expression in the case of zero-hour contracts, which have become ubiquitous throughout industry, particularly in the case of services. The division between surplus and necessary labour becomes almost meaningless, since workers are on such low hourly rates and are given such a small number of hours that they cannot earn enough to even cover their own necessary requirements.
Alongside this, we see a proliferation of overtime, which has become an expected norm for many workers. Frequently this is unpaid, leaving the capitalists to benefit from such free labour. Where overtime is paid, it may be done so at a higher hourly rate. However, as Marx comments, this may normally be accompanied by a lower hourly rate for normal times, with the overall result that workers are forced into working overtime in order to earn enough to survive.
“The increase in the price of labour when the working day is extended beyond a certain normal limit takes place in various British industries in such a way that the low price of labour during the so-called normal time compels the worker to work during the better paid overtime, if he wished to obtain a sufficient wage at all.” (p687)
Piece-wages, Marx notes, are a “modified form of the time-wage”. (p694) The worker is paid based on the quantity of products they produce in a given time, with an average quality of the product expected. “Only the labour-time which is embodied in a quantity of commodities laid down in advance and fixed by experience counts as socially necessary labour-time and is paid as such.” (p694)
The use of piece-wages, in turn, allows the capitalist to increase the intensity of labour, by providing an “incentive” for workers to work harder, produce more, and thus be paid more. Rather than being paid at a standard rate across the board, individual workers can earn more than their fellow brothers and sisters. The competition created is, in fact, a race to the bottom; in reality, it is always the capitalist who benefits, for the increased intensity of labour merely means greater profits for them.
“Given the system of piece-wages, it is naturally in the personal interest of the worker that he should strain his labour-power as intensely as possible; this in turn enables the capitalist to raise the normal degree of intensity of labour more easily.” (p695)
“But the wider scope that piece-wages give to individuality tends to develop both that individuality, and with it the worker’s sense of liberty, independence and self-control, and also the competition of workers with each other. The piece-wage therefore has a tendency, while raising the wages of individuals above the average, to lower this average itself.” (p697)
The existence of piece-wages also helps to demonstrate the hypocrisy of the capitalists when they claim that productivity increases are of benefit to the living standards of workers. If the worker was genuinely being paid on the basis of his/her output, then as productivity increases, the earnings of the worker should increase also. But, in reality, the worker on piece-wages is not being paid on the basis of their output, but for a definite amount of labour-time required to produce a given level of output. For those on piece-wages, therefore, the actual earnings of the worker may decrease as productivity increases, for the time taken to produce a given unit of output will be reduced. This demonstrates the clear disconnect between the productivity in industry and the living standards in society.
“In other words, the piece-wage is lowered in the same proportion as the number of pieces produced in the same time rises, and therefore in the same proportion as the amount of labour-time employed on the same piece falls. This change in the piece-wage, so far purely nominal, leads to constant struggles between the capitalist and the worker, either because the capitalist uses it as a pretext for actually lowering the price of labour, or because an increase in the productivity of labour is accompanied by an increase in its intensity, or because the worker takes the outward appearance of piece-wages seriously, i.e. he thinks his product is being paid for and not his labour-power, and he therefore resists any reduction of wages which is not accompanied by a reduction in the selling price of the commodity...
“The capitalist rightly rejects such pretensions as being gross errors as to the nature of wage-labour. He cries out against this presumptuous attempt to lay taxes on the progress of industry, and declares roundly that the productivity of labour does not concern the worker in the least.” (p699-700)
International competition and the world market
Marx finished his analyses on wages by examining the differences in wages between different countries. In reality, we see a great variation in the average wage across different nations, determined by a whole host of factors, including the average productivity and intensity of labour within a given country, the different costs of the means of subsistence, the relative strength of the labour movement and workers’ organisation, and so on.
“What appears within the movement of wages as a series of varying combinations may appear for different countries as a set of simultaneous differences in national wage-levels. In comparing wages in different nations, we must therefore take into account all the factors that determine changes in the amount of the value of labour-power; the price and extent of the prime necessities of life in their natural and historical development, the cost of training the workers, the part played by the labour of women and children, the productivity of labour, and its extensive and intensive magnitude.” (p701)
The various differences between the average wage levels of different countries, in turn, express themselves in turns of the international competitiveness of industry. Where wage levels are low or productivity is high, this will feed through to lower prices relative to other similar commodities on the world market. Demand for goods from the more competitive countries will increase, boosting their exports.
There is, however, generally an automatic feedback that limits this process: the commodities bought from any exporting country must be paid for in the currency of that country, which in turn boosts demand for that currency and increases the price of the exporting nation's currency relative to others. This, in turn, makes their exports more expensive, thus reducing their competitiveness and the demand for their goods.
On the other side, where a country is less competitive and there is little demand for their goods, the demand for this currency will be lower. Assuming a floating exchange rate, rather than any fixed (pegged) currency or gold standard, this will reduce the price of this currency – a process known as devaluation. A similar result occurs when a country experiences inflation due to an increase in the money supply, which is known as debasement.
With a weaker currency, however, this country will now find the price of its imports increasing, and so the cost of its own production increasing also, putting an upward pressure on prices and a downward pressure on the competitiveness of the nation's industry. For workers, the result is inflation and a decrease in their real wages.
The overall result on a world scale is a fierce international competition between the capitalists of different nations, who all seek to cut workers wages in their own countries in order to maintain and improve their industrial competitiveness – i.e. to maintain and increase their market share and their profits.
Workers of different nations are thus engaged, against their will, in a race to the bottom: “accept lower wages or we will lose our industries and jobs to other countries” – this is the hypocritical rallying cry of the bourgeois politician, who whilst warning workers of the threat of international competition on the one hand, supports the multinational big business that exploit the workers of all countries with the other.
Once again we see how, alongside the limitation of private ownership over the means of production, the nation state has become a massive barrier to the development of the productive forces and of society in general. On a capitalist basis, it will always be the bourgeoisie who enjoy the fruits of globalisation, whilst the working class as a whole – divided along national lines and set against one another – will face only greater and greater exploitation.
Only with international socialism can we eradicate disease, hunger, misery, and poverty. Only on the basis of an international revolution will there be an end to imperialist wars and the poison of nationalism that capitalism ferments. Only with a global socialist plan of production will the vast majority across the world be able to raise their standards of livings and live in harmony with one-another and with the planet that we share. Never before have the final words by Marx and Engels in the Communist Manifesto been more relevant:
“The proletarians have nothing to lose but their chains. They have a world to win. Workers of all countries: unite!”