An introduction to Marx's Labour Theory of Value - Part Two

This is the second and final part of Mick Brooks' article on the Labour Theory of Value, in which he concentrates mainly on the Marxist concept of exploitation

Last week we published the first part of Mick Brooks' article on the Labour Theory of Value An introduction to Marx's Labour Theory of Value (Part One). Today we are publishing the second and final part in which he concentrates mainly on the Marxist concept of exploitation.


Workers are exploited under capitalism. But how? What does this mean? The law of value analyses the circulation of commodities as an exchange of equivalents. Marx poses the problem this way (Capital Vol. 1) "The transformation of money into capital is to be explained…in such a way that the starting point is an exchange of equivalents. Mr. Moneybags, who is as yet only an embryo capitalist, must buy his commodities at their value and must sell them at their value; and nevertheless at the end of the process he must draw more value out of circulation than he puts into it at starting…This is the nut we have to crack!"

Nothing could be simpler than to explain the profits of the capitalist in terms of them adding a bit on the price for themselves. And capitalists like the ballpoint magnate Reynolds probably did operate with the notion of a standard mark-up. However Reynolds and the other market leaders had to drastically revise their notion of what that mark-up might be as they were confronted with the prospect of a full-scale price war in the 1940s, as the technology for producing ballpoints became standardised. Capitalists continually try to rip each other and the working class off by pushing up their prices, and therefore their profits. But first they come up against limits imposed by the law of value, the regulator of their system. Secondly marking-up prices is quite simply a zero-sum game for the boss class as a whole. What one gains, the other loses. It just cannot explain the steady unremitting flow of new income into the pockets of the rich, as they sit at home and wait for the dividends to plop on to their doormats.

The historic dispossession of the ancestors of the modern working class, such as peasants and artisans, from their means of making a living gives the capitalists the whip hand. Marx goes on, "If, then, the owner of money is to transform his money into capital, he must find in the commodity market a free worker, free in a double sense. The worker must be able to dispose of his labour power as his own commodity; and, on the other hand he must have no other commodities for sale, must be 'free' from everything that is essential for the realisation of his labour power."

Labour power

What is all this about labour power? We have all been led to believe we are paid for the work we put in. After all, if we work overtime or weekends, we expect to get paid more. If we're put on short time or laid off, we expect to lose money. Some of us are on piece work, where what's in our pay packet is directly linked to the effort we put in. That's certainly the way it looks. We'll be investigating the wages form later on. But Marx's discovery was that capitalists don't buy a determinate lump of work done. What they buy is a capacity, and they have to sweat the most out of it they can. Modern bourgeois economists use an efficiency wage theory to explain why some workers are paid more than the minimum market rate. It's because the bosses want to hang on to scarce skills. In turn workers may accord the firm some loyalty and commitment if they think they have a secure future there. Efficiency wage theory accepts that what the boss is getting is a capacity. It also argues that productivity can depend on the wage level paid. This turns neo-classical theory (which attempts to relate wages to productivity, so 'we get paid what we're worth') completely on its head.

Marx explains, "I use the term labour power or capacity for labour, to denote the aggregate of those bodily and mental capabilities existing in a human being, which he exercises whenever he produces a use-value of any kind"… "The value of labour power, like that of every other commodity, is determined by the labour time necessary for the production, and consequently for the reproduction as well, of this specific article as well. In so far as it has value, labour power itself represents nothing more than a definite amount of average social labour which has been incorporated in it. Labour power only exists as a capacity of a living individual; its production presupposed his existence; and therefore the production of labour is dependent upon the worker's reproduction of himself, upon the worker's maintenance."

What the worker is being paid for is not the work he or she does. It is his/her keep. In a market economy everything is swapped around with money. The capitalist comes along with money hires the worker and puts her to work. He can do this because the worker has no independent access to the means of production, owned by the capitalist class as a whole. The worker is paid a sum of money, enough to keep body and soul together at whatever had become the normal standard of living for workers in that society. For workers in an advanced capitalist country that standard might be quite high by historic standards - a nice house full of electronic kit, a car in the driveway and a freezer full of food. But however much living standards may have improved over time and in the course of struggle, the gap between workers and capitalists in the age of Bill Gates is more than it ever was before. Workers will hang on to that standard of life only so long as they hold on to that job with the capitalists, in so doing providing the latter with a never-ending stream of unearned income.

The value of labour embodied in the product of our labour and the value of the labour power, the worker's subsistence, are two different things. Imagine a farmer who keeps a horse to plough a field and sow oats. The farmer feeds the horse some of the oats and sells the rest. It would be pointless for the farmer to keep a horse if it only ploughed up enough soil to feed itself. Horses have traditionally been used in agriculture because they can provide farmers with a surplus above their own subsistence. That is also why capitalists employ workers. It's easy to see what's happening in the case of the horse; you can actually divide a crop up into oats for subsistence and oats for sale. It's more difficult with the worker. The worker comes in to produce commodities, which very often are consumed neither by labourers or capitalists. The commodities are sold on the open market. The worker is paid off with a wage, which he or she is free to spend as he/she thinks fit. That's the theory. Really you have to pay the rent, and you have to eat. By the time you've paid out on essentials all you have left is pocket money. Meanwhile the boss trousers the surplus left over in money form.

The worker adds value in the process of production. That is a well recognised fact. The Inland Revenue can compute value added in order to calculate how much VAT they should be getting. This product of the worker's labour undergoes a two way split. If we look at every day, every hour, every minute of time or every piece of work done value added can be divided in two. Marx called these necessary and surplus labour. Necessary labour is what goes to maintain the workers' labour power - it is paid labour and goes towards the workers' wage. Surplus labour is labour which goes to keep not just your immediate boss, but the whole class of hangers on, in idleness. This is unpaid labour.

Hostile commentators often attribute to Marx the notion that workers could only get an absolute subsistence minimum wage. This, of course, is the prelude to 'proving' that Marx was wrong, or at least completely out of date. Actually Marx and Engels were scornful of contemporary theories of the 'iron law of wages' as was put forward by Lassalle, an opponent of theirs in the German labour movement. Quite logically Lassalle contested that, since wages were fixed, trade union activity and strikes were a waste of time. Marx, as head of the International Working Men's Association, vigorously argued the opposite. The International actually spent most of its time and effort raising funds for workers on strike and issuing leaflets in different languages and appeals against the danger of international scabbing. Marx was also one of the nineteenth century economists most aware of rising standards of living for the workers. Moreover he saw these early faltering steps of the labour movement in gaining an improved standard of living through struggle as the necessary first stage in the process of self-emancipation of the working class. "The comprehensiveness of what are called 'needs', and the method of their satisfaction, are likewise historical products, depending upon the stage of civilisation a country has reached; and depending, moreover, to a very considerable extent upon what conditions, and therefore with what habits and claims, the class of free workers has come into existence. Thus the value of labour power includes… a historical and a moral factor."

Paid and unpaid labour

The division of the working time into paid and unpaid labour is not a feature of capitalism alone. All ruling classes in history have maintained themselves by exploiting the oppressed class. "Surplus labour was not a new discovery made by capital. Wherever a part of society has a monopoly of the means of production the worker, whether free or bond, must supplement the labour time necessary for his own maintenance by surplus labour time in which he produces the means of subsistence for the owner of the means of production, whether this owner be an Athenian devotee of the Good and the Beautiful, an Etruscan theocrat, a Roman citizen, a Norman baron, an American slave owner, a Wallachian boyar, a modern landlord or a capitalist." The difference is that, under capitalism, exploitation is not obvious. Under feudalism the peasants often worked three days on their own strips of land and three days on the lord's land. The product of the first three days' work would be consumed in the peasant household while the product of the next three days labour was harvested and taken to the castle for the lord and his retainers. Whatever the contemporary religious or traditional justification of this practice, it would not have been necessary for medieval revolutionaries to have written erudite tomes explaining that this was exploitation. Likewise with the slave. Actually it would seem here that all the slave's labour was unpaid. In fact if the slave was producing a commercial crop such as cotton or tobacco, the slave owner would have to put aside a part of his revenue to buy food for the slaves. The same division of the product of work into paid and unpaid portion takes place in all forms of class society.

The reality of exploitation under capitalism is complicated by several other factors. First the medieval peasant is likely to harvest a crop with his own hands. It is obvious that the food he eats is the fruit of his own labour. Under capitalism there is a division of labour within the workplace as well as the division of labour imposed by production for the market. No one worker can point to the product and say 'this is mine'. A commodity such as a mass-produced car passes through the hands of hundreds of detail workers. It is the product of the collective labour of the factory 'hands'. This is a broader concept than just assembly-line workers. A big factory is likely to hire separate cleaning staff. The alternative, of course, would be to stop work while the production line workers clean up. Likewise the Coventry toolroom agreement recognises maintenance engineers as productive workers by cutting them in on any bonuses or piece work agreements.

Secondly the surplus is not all consumed by your direct employer. Marxists have used the formula - rent, interest and profit - to explain the division of surplus value among the different fractions of the capitalist. Actually it's even more complicated than that, as we shall see. But if the banks raise interest rates or industrial rents go up, that will hit the industrialist's profits quite independently of the struggle of the workers for higher wages, for a bigger share of what they produce.

Finally the capitalist has other costs than labour. For a modern multinational, wages may represent no more than 5-10% of total costs. Though the value added by the worker may be divided into necessary and surplus labour, the value of the commodity comes in three parts. There is surplus value, the unpaid labour of the working class that the capitalists all feed off. Then there is the time put in by the worker to reproduce the elements of his or her own wages. When the capitalist 'advances' this to the worker in the form of a wage, Marx calls this variable capital. It is variable because it is part of the money capital, which is capable of yielding a surplus in the process of production. All the other outlays by the boss, for raw materials, machinery heating light and power, and so on, are called constant capital by Marx. These are called constant capital because they pass their value unchanged to the final product. They contain surplus value from workers further down the chain of production. This is easy to see in the case of raw materials. Nobody thinks that the chocolate coating to a sweet adds any value apart from its cost for the capitalist who buys it. Machinery does aid the productivity of labour but does not itself add value. To take the simplest case, the capitalists (or rather their managers) know a machine will produce one million widgets over a ten year period, by which time it will be clapped out. If the machine costs £1 million they will assess the depreciation on the machine embodied in each widget at £1. So if they put £1 aside every time they sell a widget they will have £1 million when it's time to buy a new machine. In practice capitalists will have to take account of the fact that the machine will probably be obsolescent and have to be scrapped before it is physically worn out, but the principle is clear. Machinery just passes its value unchanged to the final product to the extent that it depreciates. It aids the worker in creating surplus value but does not itself create new value. That is why all the other elements of the production process apart from labour power count for the capitalist as constant capital.

Exploitation in action

Let's look at exploitation in practice. Figures come from the research department of the American textile workers' union, UNITE. If an American woman spends $100 on a dress:-

$54 goes to the shop. But all the retailer does is pass the goods along and hang them up for people to look at. Where does the money come from? The sales effort squanders huge resources in modern capitalism. These resources can only come from the surplus value generated in the productive part of the economy.

$18 goes on materials. The manufacturing firm just buys these in.

$16 is manufacturing overheads and profit. This is a tricky one to analyse in Marxist terms. Heating and lighting are costs, just like fabrics and zip fasteners. But some of the 'costs' will really be a share of the profits. Rent, for instance, is really siphoned off by another section of the property owning class. To keep it simple, we'll assume that $15 of those $16 really are costs and the poor old manufacturer only makes $1 on a $100 dress (a rate of profit of just 1%).

The worker who makes the dress gets $12 back in wages.

Now let's look at this in Marxist terms:-

Constant capital is $33 - $18 for materials, $15 for other production costs.

Variable capital is $12

Surplus value is $55, of which $1 goes to the immediate boss and $54 on Oxford Street rents and the pay of salespeople, who no doubt work very hard, but do not generate new values through their work.

The rate of surplus value or rate of exploitation is the amount of time the worker puts in to reproduce the elements of her wages compared with the amount of time the worker devotes to enriching the capitalist class. In this case the rate of exploitation is more than 450%!

Here's how the rich get rich and the poor stay poor. And it's true whether you work on a farm or in a factory, and whether you dish up burgers or write computer programmes. The rich get rich off our unpaid labour.

Don't you think a rate of exploitation of 450% is good enough for the bosses? Don't you think they'd be happy getting a worker to put in about 11 minutes every hour to get his or her wages back while he/she works the other 49 minutes to keep the capitalist class in clover? Not on your nelly! It's never enough. There is a compulsion on individual capitalists to squeeze more and more out of you. In part the whip is supplied by competition with other firms. If you have to beat the opposition, the best way is to sell the stuff cheaper. The best way to sell cheaper is to make it cheaper - that is with less labour. They call it cutting costs, but that's what it is. Let's see what this race does for the development of the system as a whole.

Absolute surplus value

The bosses are always out to get that little bit more out of the workers. One obvious way they do that is to get you to work longer hours. Let's stick with the garment industry.

Lina Rodriguez Meza, a clothing worker in New York explains. "When it's busy, we work up to sixty to sixty-three hours. The conditions in the factory are not good. In the factory where I work, almost everyone is from Ecuador. Those people work hard. And since they come very far from their land, they come and are afraid of losing their jobs, so they enslave themselves."

Lina's in a difficult position. Nobody wants to put in over sixty hours in a week. But the basic rate is so low. And in the fashion industry work is completely casual, as she explains. "Last week we only worked for fifteen hours. And now we worked two days in a row, but it seems like we're going to be off again."

Lina actually needs the overtime to make ends meet. She is a worker in the richest country in the world.

What's going on here? As we have seen, there is a compulsion on the capitalist class to try to get more and more out of us, to raise the rate of exploitation. One way to do this is what Marx called the extraction of absolute surplus value. This means exploiting the worker over a longer time. For instance if a worker does four hours to earn their keep and then puts in another four hours to help the boss out, the rate of exploitation is 100%. But if the worker can be induced to slave for ten hours a day, then that extra two hours is a free lunch for their boss. In Marx's time the capitalists just used their class power to lengthen the working day. Since workers were usually paid by the day, the struggle over the length of the working day was a basic form of class struggle.

Critics of Marx say that's all out of date. What is happening to Lina and millions like her shows that the extraction of absolute surplus value is still a very effective way of lining the bosses' pockets. That's why it's still going on in the new millennium - in the heart of New York. We all know the jobs - security guards, caterers, cleaners, drivers, railway workers - where it's understood that you'll have to work overtime to make enough to feed a family on because the basic rate is so low.

Most workers in the United States and the other rich countries did gain better wages and conditions - for a time. They did it by organising in trade unions and threatening the strike weapon. Any strike shows that when the workers stop working, nothing gets done. It's us that produce the wealth.

But now big business is trying to take back all the gains of past struggles. Why? - because they can. Because they can roam the world looking for cheap labour to exploit. Because they can sniff out and batten on to low pay pockets in rich countries. Because if they can use child labour, they will use child labour. Because if they can use slave labour, they will use slave labour.

How does all this affect workers in rich countries such as the United States. In 1973 there were nearly 1.5 million clothing and textile workers in the USA. Some of them have lost their jobs as firms like Nike pull up stakes and go where they can get away with paying workers less. While only 4% of clothing was imported into the States in the 1960s, it's now gone up to 60%.

But 860,000 still work in the rag trade in the United States. American bosses have responded to foreign competition in different ways. One response of textile and clothing companies in the rich countries to foreign competitors has been to make sure that, if they're paying you more than workers in Pakistan or El Salvador, they get more out of you.

Relative surplus value

American clothing bosses have cut costs by mechanising. Whereas only 6% of clothing production in the United States used modern machinery in the 1960s, twenty years later the business was 40% automated. As a result productivity in clothing manufacture has doubled in the rich countries over a twenty year period. In other words workers are producing twice as much as they did before. As a result they are working less time to make up the value of their wages and more time for the boss class. This is what Marx called the production of relative surplus value. Relative surplus value can be increased by raising the intensity of labour (which is what bosses were trying to do to British textile workers in the 1930s - as we see below) or by raising the productivity of labour through mechanisation.

What has happened to American workers' wages as a result of mechanisation? Clothing workers' wages in the USA buy exactly the same as they did twenty years ago. The entire benefits of this increased productivity has gone to the clothing employers.

What's this all about? We know that a simple and obvious way of raising the rate of exploitation when the labour movement is weak is to make the workers put in more hours to extract more absolute surplus value. Marx showed how this strategy came up against the resistance of the working class in the cotton textile industry in the middle of the nineteenth century. The workers imposed their own limits through strike action and later won a legal limit on the working day. If capitalists can't increase hours without limits to raise the rate of exploitation then they're going to have to make the workers achieve more in the hours when they do have them at their disposal. If a worker is knocking out twice as many dresses in eight hours, then they're reproducing the elements of their wages in two hours instead of four. That leaves six hours for the production of surplus value.

One way of extracting relative surplus value is by raising the productivity of labour. This usually involves the accumulation of capital with more and more machinery behind the elbow of each worker.

Intensification of labour

Another way is by raising the intensity of labour. If you can't lengthen hours, then they make sure they get more out of you while you're there. Two classic ways of getting more sweat out of workers are speeding up the track and getting the workers to mind more machines.

This has been going on a long time. However much you produce for them they always want more. At the time of the great depression of 1929-33, the British cotton capitalists thought it was a good time to put the boot in to textile workers. They demanded that weavers mind six looms instead of four - like Japanese workers. The 'more-looms' dispute, went together with a demand for pay cuts of up to 12 ½ % - more work for less pay! This triggered a walkout of 150,000 weavers in Lancashire. After a bitter dispute in which police baton charges against picket lines became routine, the strike was sold out by the trade union tops.

The accumulation of capital

The process whereby more and more dead labour (constant capital, in Marx's term) is used relative to living labour in the production process is called the accumulation of capital. It is the curse of the individual capitalist that they cannot just consume the unpaid labour of the working class in luxury living (though they don't do badly). They are forced by competition among themselves to plough back a major part of their ill-gotten gains. This in turn raises the productivity of labour. By accumulating capital and creating a mass working class all over the world capitalism is creating the conditions for its own supercession as a system. It is taking us to the threshold of a society of abundance. Yet at the present time half the world's population lives in desperate poverty on $2 a day or less.

The accompanying diagram adapted from the Economist in 1985 shows that the productivity of labour in textile spinning has gone up two thousand times over since the industrial revolution began around 1750 - up to 1980. It's still rising, faster than ever. So they are certainly exploiting us more! We've deliberately used the old-fashioned example of spinning. The reader will probably have been told about the spinning jenny and the industrial revolution at school and Marx dealt with it extensively in his writings. But clearly the most spectacular starburst of productivity is to be seen in industries subject to computerisation. "The speed at which computers are capable of carrying immense computations is almost impossible to grasp. As long ago as the early 1960s, when the space-frame centrepiece of Expo 67 was being designed, a computer was employed for two hours. A mathematical graduate could have performed the same calculations, but would have taken about 30,000 years. This is equivalent to about 1000 mathematicians working for their entire lifetimes." (from Mike Cooley - 'Architect and bee')

Increasing organic composition of capital

So modern textile machinery makes workers enormously more productive than people with distaffs three hundred years ago. Likewise Computer Aided Design means a three dimensional design of a complex piece of machinery can be generated in an instant - whereas twenty years ago a team of draftsmen with 5H pencils and 'T' squares took a week to do the same job. The examples can be multiplied at will. But there is a fly in the ointment. Modern textile machinery costs more than distaffs. A bank of computers costs more than pencils and 'T' squares. It costs a lot more to exploit the workers more. Dead labour progressively replaces living labour in production. Marx called the secular trend for the ratio of constant capital (outlays on plant and raw materials) to rise relative to variable capital (money laid out on wages) an increase in the organic composition of capital. And it's been going on all over. One example: General Motors opened its Saturn plant on a greenfield site in Tennessee. The plant cost $5 billion - that's $5 thousand million. It will employ about 6,000 workers. That's nearly $1 million behind the elbow of each worker in the modern car industry.

You won't stop the bosses exploiting workers. As long as they are bosses, they have to do that. But you'll never stop workers fighting back against exploitation either. As long as they are wage workers they will have to fight for a better future. That means an end to the bosses' system and the socialist transformation of society.