A Brief Discussion of the Origin of Surplus Value




(October 2014)

Part of a series on Surplus Value

To understand how capital accumulation is accomplished, we must address the origin of surplus value.

Capital and value are not simply added sums, but rather exist at a social level. Thus surplus value is not a physical form in which an added sum is produced. Capital is interested solely in increasing its quantity of value; the objects of capital (goods, money) are irrelevant, mere means to an end. The movement of capital is essentially the constant growth of a monetary quantity, a developed form of circulation of money.

What capital pursues is that constant growth. For example, Apple periodically issues new versions of its iPhone. Though Apple may advertise its goal as making its customers happy through product improvement, its only actual interest and reason for existence is the constant accumulation of value.

Surplus value can’t be produced in mercantile circulation, including any specific operations of mercantilism. Nor can it be produced in any specific operations of finance capital. Even while these forms generalized by capitalism are essential to its functioning, they do not produce value. Rather, at the level of the social formation as a whole, mercantile and money circulation are both endemically governed by the rules of exchange between equivalent values, which are imposed on every individual act of exchange. In all exchanges in the spheres of circulation and finance, no new value is or can be created. Surplus value requires the creation of new value.

The only capital that can create value in its movement is industrial capital. Industrial capital is the only productive capital. All other forms of capital are non-productive. The specific operations of industrial capital operate outside the sphere of circulation, and are not based on exchange. These operations are possible when all the necessary factors of production (raw materials, means of production, and waged labor) are present, and they unroll when material transformation is in process. The principal actor of that material transformation is LABOR.

Industrial capital functions as the supplier of surplus value on behalf of capital as a whole. Industrial profit (distinct from surplus value), mercantile profit, interest, and rent are all derivative forms originating from a portion of the social surplus value directly connected to the sphere of production. They are not autonomous forms of capital accumulation or growth, though they may appear as such because of the complexity of their competing relations, which attach various forms of concentration of capital to one another in the functioning of a formal bourgeois economy. Production is the sole source of whatever share of surplus value that each individual capitalist (of whatever type) finally appropriates.

We cannot see the structural aspects of the production of surplus value, but only their results. Economic practices are results. Only by analyzing the hidden reality of the production of surplus value, can we understand the mechanisms derived from its realization and its transformation. This allows us to recognize that the relations of distribution are determined by the relations of production. This was one of the important contributions of Marx.

It is important that we differentiate between two types of capitalism: productive and unproductive. This refers to whether it produces new value (surplus value), or circulates previously produced value.

Productive capital is divided into two parts: 1) the portion invested in the means of production (equipment, raw materials), which is consumed in the labor process; 2) and the portion invested in wages, the cost of the labor power that capitalism buys to use for a determined period. Marx identifies the first as constant capital and the second as variable capital. Only the use of variable capital generates new (surplus) value.

The means of production are in their own right produced by previous labor, such as the extraction of raw materials, the construction of a building, or the making of a tractor or a hammer. Thus constant capital already represents a certain quantity of value and can’t, on its own, introduce new value. Instead, its value is transferred to what is being produced.

A non-productive enterprise progressively consumes constant capital, but creates no new value. They generate profit through the unequal exchange of values. Retail enterprises like shops and restaurants price their goods at an amount higher than the amount of their original value plus the transferred value from their equipment and buildings. The difference is their profit margin.

Consumers pay higher prices than goods are worth when enterprises are able to monopolize markets through imposing power (Shell gas stations), state intervention (insurance enforced by Obamacare), economies of scale (Amazon, Walmart), and/or providing intangibles that generate demand such as convenience or enjoyment (McDonald’s, Netflix).

The circulation and transfer of value is achieved by the intervention of human labor (work). The employees of such enterprises are performing a service, selling their labor/work as merchandise by exchanging it for an equivalent value in the form of money.

Human labor, like capital, has a double capacity: 1) it can be either nonproductive (conserving the value of the means of production that it consumes by transferring it to the produce), or 2) it can be productive (adding a supplementary value related to the quantity of labor required). In the former case, what is being sold and bought is labor, a service. In the latter case, what is being sold and bought is not the labor itself, but the use of labor/work for a certain amount of time. The merchandise is labor power. Labor power used in the process of industrial production generates more value than the capitalist pays in wages—that is surplus value. The theft of that value is exploitation.

All those who work for wages or sell their services for a fee are in the social category of laborers. All laborers are dominated by capital. But of this broad category, only industrial workers face capital directly and are exploited in the production process. The core driving mechanism of capitalism is this fundamental antagonistic contradiction between capital vs. labor. To be precise, the working class, the proletariat, refers to industrial workers.

In contrast to a system of slavery, under capitalism the laborer is not merchandise. The capitalist mode of production requires the “freedom” of laborers (wage slavery rather than full slavery) so it doesn’t need to pay the costs necessary for their survival. In the US, capital was initially required to judicially face all the responsibilities for the maintenance of their merchandise (slaves), and return a portion of their accumulated value for the reproduction of that production relation. A civil war was waged to correct that deformation of capital.

The value of merchandise has two components: 1) the value of the means of production transferred in the labor process, proportional to the quantity of past labor necessary for its production; and 2) an added value by the new process, proportional to the present quantity of socially necessary labor.

The initial historical conditions for the emergence of the capitalist mode of production require sufficient productivity of labor. This depends, of course, on the given state of development of the productive forces: the labor instruments and techniques of production, plus the possession of raw materials (land and waters), plus the presence of people compelled to work.

On this basis, the employment of wage labor results in a newly created quantity of value that always exceeds the value of the labor power used in each labor process. To clarify, only a small portion of the spent labor is necessary to reproduce the labor power that is being used (destroyed) in the labor process—in other words, to keep the laborer in good enough condition to come to work again the next day. The rest, in relation to that labor, is excess—a very important variable surplus that is appropriated by the capitalist. To put it another way, a portion of the value newly produced represents an equivalent of goods that the worker consumes to reproduce her/his labor power. The rest is surplus value.

The transferred value to the product from the means of production, in proportion to its utilization, represents the equivalent of new means of production that must be acquired for the reproduction of the labor process. The condition for this process is the permanent appropriation of the means of production by capital.

The creation of surplus value by the movement of capital is, essentially, all the technical and social conditions (forms of wage labor) that allows work to produce a value exceeding the value of the labor power that went into it.

Imperialism creates social conditions (the politics of misery) in dominated social formations that facilitate a more intense rate of exploitation, generating surplus value that exceeds in far greater proportions the value of the labor power used in the production process. In these cases of super-exploitation, capitalists consider workers disposable and replaceable, and impose sub-survival wages accordingly.

The mechanism of the production of surplus value is the mechanism of the capitalist relations of production: the capacity of the capitalist to use (destroy) labor power vs. the capacity of the working class to resist (through economic struggle). Fundamentally, surplus value is a mechanism of exploitation, the economic struggle of the capitalist class to extract surplus value, and the struggle of workers to preserve their reproduction.