3) Chapters 4-8: Surplus-value
Having charted the historical development of commodity production and money, Marx now turns his attention to the question that had stumped the classical economists: what is the source of profit within capitalism?
Up until this point in Capital, Marx deals mainly with historical processes and explanations of things that were generally already understood. For example, although not fully developed, the concept of a labour theory of value had already been proposed by Marx’s predecessors, the classical economists. Similarly, the classical economists, like Marx, understood capitalism to be a system of commodity production, based on private ownership, and driven by the profit motive. What none of the classical economists could answer or explain, however, was: where does profit come from?
What is capital?
In order to answer this question, Marx begins by asking: what is capital? How does this historical system arise? And what is it that differentiates capital from money or other commodities?
Simply put, money becomes capital only when it is used to purchase goods or labour which ends up in making a profit. If a shepherd sells wool for money to buy bread to eat, he wasn’t using this money as capital. However, when a merchant uses his money to buy wool in order to sell the wool at a higher price, this money is capital.
Prior to capitalism, capital was accumulated mainly through commerce – not simply the trade in goods, but plunder, exploitation, conquest and piracy.
Marx emphasises the importance of this historical development, in particular, the development of commodity production and exchange:
“The circulation of commodities is the starting-point of capital. The production of commodities and their circulation in its developed form, namely trade, forms the historic presuppositions under which capital arises. World trade and the world market date from the sixteenth century, and from then on the modern history of capital starts to unfold.”
The generalisation of commodity production and exchange; the development of a universal equivalent in the form of money; the division of labour in society; private ownership; the establishment of a world market: all these form, therefore, the prerequisites to the emergence of capital and of capitalism.
Marx explains the emergence of capital in more detail:
“The first distinction between money as money and money as capital is nothing more than a difference in their form of circulation. The direct form of the circulation of commodities is C-M-C, the transformation of commodities into money and the re-conversion of money into commodities: selling in order to buy. But alongside this form we find another form, which is quite distinct from the first: M-C-M, the transformation of money into commodities, and the re-conversion of commodities into money: buying in order to sell. Money which describes the latter course in its movement is transformed into capital, becomes capital, and, from the point of view of its function, already is capital.”
With more simple forms of commodity circulation, the overall aim of the producer is the fulfilment of their own needs, not to increase their wealth. Each individual produces in order that they sell; in turn, they sell in order that they may buy the things they need. These use-values are consumed once they are bought. The circuit C-M-C is ended with selling in order to buy and consume. “Consumption, the satisfaction of needs, in short use-value, is therefore its final goal.”
As explained, however, this money is not capital as it does not seek a profit. The leap from money to capital sees a qualitative change: no longer are commodities and consumption the start and end point of the cycle; instead, we see a cycle that begins and ends with money. In other words, we have the circuit M-C-M, buying in order to sell. The aim of this exchange is not obtaining use-values but only money, or exchange-value. “[T]he buyer lays out money in order that, as a seller, he may recover money…The money therefore is not spent, it is merely advanced.”
With the development of capitalism and the generalisation of commodity production and exchange, and the resultant development of money, production is no longer conducted for the purpose of fulfilling individual needs. Instead, the raison d’être for production and trade is profit: the creation of money from money. “The path M-C-M…proceeds from the extreme of money and finally returns to that same extreme. Its driving and motivating force, its determining purpose, is therefore exchange-value.”
The capitalist does not care for the actual needs in society. In as much as they care about fulfilling needs, it is only in order to sell their produce and realise their profits. The motor force for production therefore becomes the endless drive for profit:
“As the conscious bearer of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which money starts, and to which it returns. The objective content of the circulation we have been discussing – the valorisation of value – is his subjective purpose, and it is only in so far as the appropriation of ever more wealth in the abstract is the sole driving force behind his operations that he functions as a capitalist, i.e. as capital personified and endowed with consciousness and a will. Use-values must therefore never be treated as the immediate aim of the capitalist; nor must the profit on any single transaction. His aim is rather the unceasing movement of profit-making.”
Thus the purpose of simple commodity production is the realisation of use-values – that is, the satisfaction of wants. In contrast, the purpose of the circulation of capital is the realisation of exchange-value. Of course, in this money-making process, if the capitalist ends up with the same money as he started, the whole exercise would have been pointless. It would therefore be more accurate to say that the circulation of capital is the expansion of exchange-value, and the creation of surplus-value. This is what Marx means by the ‘valorisation’ of capital, namely the increase in the value of capital assets through the application in production of value-forming labour.
Capital, then, is distinguished by its nature as self-reproducing wealth; money that begets money; value that creates more value. Therefore, as soon as money is directed at an activity that yields, or promises to yield, profit, that money becomes capital.
Buying cheap and selling dear
Now let us return to the question: by what process, then, does capital generate value from value? How does the circulation of capital become M-C-M’, where M’ exceeds M? The point is not simply to get money, but to enable the owner of money to obtain more money than originally advanced.
Up until Marx, the popular conception was that the profit within capitalism came from buying cheap and selling dear. In other words, that profit – or surplus value – is created simply through the act of exchange, entirely within the sphere of circulation.
Marx explains that this is false. The process of circulation is not a process of creation, but simply a means by which money is transformed into commodities and vice-versa. In the sphere of circulation, value changes form, but it is not created. Circulation, the exchange of commodities, consists of both a purchase and a sale. If there was an advantage in buying, this would be lost in the sale of these commodities. No net-surplus value is produced in the transaction, since one person’s gain is another’s loss. We witness not the creation of surplus value, but the transfer of value from one party to another. It is a case of swings and roundabouts.
Value is created not in circulation, but in the process of production. It is an expression of the socially necessary labour-time involved in production. However, the value contained in a commodity is only realised through the act of exchange, namely when it is sold. Circulation is therefore vital to the process, but nevertheless it produces no value, only serving to move existing value around. This is the function of the market.
The law of value – the laws of commodity production and exchange – therefore “necessarily involves the exchange of equivalents, provided.” This law, as discussed previously, is a generalisation that emerges from the many acts of exchange occurring universally in society. Whilst in any individual case there may be a divergence between the price at which a commodity is sold/bought and its value, on average commodities are exchanged on the basis of an equivalent quantity of value, namely the socially necessary labour-time contained within them.
“It is true that commodities may be sold at prices which diverge from their values, but this divergence appears as an infringement of the laws governing the exchange of commodities. In its pure form, the exchange of commodities is an exchange of equivalents, and thus it is not a method of increasing value.”
What Marx is saying here is that if exchange is governed by the law of equivalents, the circulation of commodities cannot be the source of surplus-value.
It must be noted that prices and values of commodities ultimately express the relationships between the labour of different individual producers. Therefore, as Marx explains, if commodities are consistently sold at prices above their actual costs, the result is just a general inflation, not the creation of any new value:
“Suppose then that some inexplicable privilege allows the seller to sell his commodities above their value, to sell what is worth 100 for 110, therefore with a nominal price increase of 10 per cent. In this case the seller pockets a surplus-value of 10. But after he has sold he becomes a buyer. A third owner of commodities now comes to him as seller, and he too, for his part, enjoys the privilege of selling his commodities 10 per cent too dear. Our friend gained 10 as a seller only to lose it again as a buyer. In fact the net result is that all owners of commodities sell their goods to each other at 10 per cent above their value, which is exactly the same as if they sold them at their true value. A universal and nominal price increase of this kind has the same effect as if the values of commodities had been expressed for example in silver instead of in gold. The money-names or prices of the commodities would rise, but the relations between their values would remain unchanged.”
The problem with the erroneous concept of obtaining profit by buying cheap and selling dear is that it assumes that there exists a group of people in society who are purely buyers and another group that are purely sellers; “that there exists a class of buyers who do not sell, i.e. a class of consumers who do not produce”. Such a concept derives from the old undialectical view of Marx’s predecessors, who failed to see the interconnectivity within the economy. In a universal system of commodity production and exchange, we are all buyers and sellers. Even the capitalists are both sellers and buyers: of course they sell a product, but they must first buy in raw materials, invest in machinery, and pay out wages to workers.
Whilst there can be individual cases of ‘cheating’ within any isolated act of exchange, such swindling cannot help to increase the amount of value within society as a whole. What is gained by cheating with one hand will simply be lost later with the other; one man’s loss is another’s gain and vice-versa. “The value in circulation has not increased by one iota; all that has changed is its distribution between A and B. What appears on one side as a loss of value appears on the other side as surplus-value; what appears on one side as a minus appears on the other side as a plus…The capitalist class of a given country, taken as a whole, cannot defraud itself.”This cheating, however, cannot explain the origin of surplus value.
When looking for the source of surplus value within capitalism, therefore, we cannot look at isolated acts of exchange, or in the realm of circulation, but must instead analyse production and exchange as a whole. “If equivalents are exchanged, no surplus-value results, and if non-equivalents are exchanged, we still have no surplus-value. Circulation, or the exchange of commodities, creates no value.”
If not in the sphere of circulation, then, where does surplus value come from?
“The money-owner, who is as yet only a capitalist in larval form, must buy his commodities at their value, sell them at their value, and yet at the end of the process withdraw more value from circulation than he threw into it at the beginning. His emergence as a butterfly must, and yet must not, take place in the sphere of circulation.”
Our capitalist must begin with money, purchase commodities, sell his product, and then end up with more money that he started with. Therefore, the increase of value must have something to do with the commodity itself. But what?
“In order to be able to extract from the consumption of a commodity, our friend the money owner, must be lucky enough to find within the sphere of circulation, on the market, a commodity whose use-value possesses the peculiar property of being a source of value, whose actual consumption is therefore itself an objectification of labour, hence a creation of value.”
In other words, there must be a commodity that the capitalist can buy that itself is able to create surplus value by its very consumption. And as Marx explains, “the possessor of money does find such a special commodity on the market: the capacity for labour, in other words labour-power.”
This ‘labour-power’ – the ‘capacity for labour’ – is possessed by the worker and stands for all kinds of intellectual and physical abilities. It is the only thing the worker possesses for sale. It is normally expressed in terms of a contract of employment between a worker and employer for a given period of time. For example, workers are employed on contracts that specify a number of hours per week or weeks per year that they are due to work for the boss. How efficiently or how hard they work in this time – that is, how much they actually produce in a given week or year – is then a question for the capitalist to work out. The capitalist pays for the worker’s time; it is then up to the capitalist to utilise this time as effectively as possible in order to produce as much as possible.
The qualitative leap forward by Marx, therefore, was to see that workers themselves are not only the buyers of commodities, but are also the sellers of a very special commodity: their labour-power – the ability to work. What the capitalist buys from the worker, therefore, is not their actual labour, i.e. the products of his work, but their ability or capacity to work. The purchase and consumption of this special value-creating labour-power commodity transforms the owner of money into a capitalist.
This social relationship between the worker as the seller of labour-power and the capitalist as the buyer of labour-power is qualitatively different from previous modes of production, such as slavery or feudalism. Under slavery, the labourer is nothing more than a tool – a commodity that is owned outright by the slave-owner. The slave does not sell their ability to work as a commodity; the slaves themselves are the commodity. Under feudalism, meanwhile, the serf works on the land and the land, in turn, is owned by the feudal landlord. For four days, say, they will work on the lord’s land and for two they can work on their allotted plot to produce their own livelihood.
Under capitalism, however, the worker does not belong to the capitalist, and appears to sell their labour-power of their own volition. The worker, therefore, is not “forced” to work for the capitalist; they may always choose to end any contract and seek employment elsewhere, if they can find any. “[H]e must be the free proprietor of his own labour-capacity, hence of his person. He and the owner of money meet in the market, and enter into relations with each other on a footing of equality as owners of commodities, with the sole difference that one is a buyer, the other a seller; both are therefore equal in the eyes of the law.”
Such a situation, where one class of people sells their ability to work to another, does not arise naturally. Whilst the worker is not “forced” to work for any individual capitalist, nevertheless, in order to survive, the working class as a whole must seek employment from the capitalist class as a whole. In other words, for the worker-capitalist relation to arise, there must first be a situation in which a class of people have no other means of survival but to sell their labour-power to another – that is, to work for a wage.
“[N]ature does not produce on the one hand owners of money or commodities, and on the other hand men possessing nothing but their own labour-power. This relation has no basis in natural history, nor does it have a social basis common to all periods of human history. It is clearly the result of a past historical development, the product of many economic revolutions, of the extinction of a whole series of older formations of social production.”
Thus in order for capitalism to thrive, the working class first had to be created – that is, there needed to be a section of the population who were not, like the serfs under feudalism, tied to working on the land, but who had nothing to sell for their survival other than their ability to work. Such a class of wage-labourers did not emerge smoothly, but was the result of violent upheavals whereby peasants were driven from the land and thrown into the newly developing towns and cities, compelled to work for a wage or face a life of pauperism.
Labour-power, therefore, was not always a commodity – for example, when it was consumed by the labourers themselves. But to consume one’s own labour-power is only possible if you are also the owner of the necessary means of production. Excluded from these means, the labourer is forced to sell their labour-power as a commodity on the market.
“The historical conditions of its [capital’s] existence are by no means given with the mere circulation of money and commodities. It arises only when the owner of the means of production and subsistence finds the free worker available, on the market, as the seller of his own labour-power. And this one historical precondition comprises a world’s history. Capital, therefore, announces from the outset a new epoch in the process of social production.”
The worker, then, sells the commodity of labour-power to the employer. “Like all other commodities,” Marx notes, “it has a value.” “How is that value determined?”
Marx explains: “The value of labour-power is determined, as in the case of every other commodity, by the labour-time necessary for the production, and consequently also the reproduction, of this specific article…in other words, the value of labour-power is the value of the means of subsistence necessary for the maintenance of its owner.”
The price of labour-power is represented by the wages paid to the working class. This wage, therefore, must be able to cover the necessary expenditure for the worker’s maintenance, including food, shelter, clothing, healthcare, education; that is necessary “to maintain him in his normal state as a working individual.”
When discussing wages and the value of labour-power it is important to note that Marx is always and everywhere, as when discussing the value of any other commodity, talking about a social average, not an isolated case. We are not, therefore, concerned with the wages needed to maintain a given individual, but the social wage needed to maintain the working class as a whole. In this respect, Marx emphasises that the value of labour-power must cover not only the expenditure of the individual worker, but also the worker’s family, and indeed the continued existence of the working class a whole. If wages – the price of labour-power – are pushed down below this socially necessary value, the capitalist will quickly find themselves with a dearth of workers and the market forces of supply and demand will work to push wages back up.
Similarly, by viewing the value of labour-power in terms of society as a whole, Marx explains the social and historical factors present in determining wages:
“[T]he number and extent of his so-called necessary requirements, as also the manner in which they are satisfied, are themselves products of history, and depend therefore to a great extent on the level of civilisation attained by a country; in particular they depend on the conditions in which, and consequently on the habits and expectations with which, the class of free workers has been formed. In contrast, therefore, with the case of other commodities, the determination of the value of labour-power contains a historical and moral element.”
The social wage necessary, therefore, is not simply that required for the bare minimal subsistence of the working class, but is that of a given social and historical epoch, varying from country-to-country and from epoch-to-epoch. This can be considered the ‘going rate’ at different times and in different countries.
On the one hand, therefore, higher wages are needed for the additional expenditures – such as the latest technologies and higher levels of education – that workers need to function within the fast pace of modern capitalism; on the other hand, the working class, through a history of class struggles, has raised the social expectation of what an average wage – and thus an average standard of living – should be.
The value of labour-power, therefore, comes back down to that of a social relation – ultimately of a class struggle between the workers and the capitalist class; a struggle for higher wages on the side of the workers, and greater profits on the side of the capitalists.
The process of production
The source of profit, then, is to be found inside the process of production. This profit, meanwhile, is realisedthrough the act of circulation, namely, in the sale of commodities in the market place.
This process of production, Marx explains, is the unity of two sub-processes: the labour process and the valorisation process. Marx starts by examining the labour process in its most generalised and abstracted form: as “a process between man and nature” in which “he acts upon external nature and changes it.”
“The simple elements of the labour process are (1) purposeful activity, that is work itself, (2) the object on which that work is performed, and (3) the instruments of that work.”
We see here how Marx does not distinguish between different types of labour. In particular, he highlights that “it is not what is made but how, and by what instruments of labour, that distinguishes different economic epochs.”
Today we hear the ridiculous proposition from bourgeois academics that the working class does not exist in the advanced capitalist countries because of the destruction of industry and ‘blue-collar’ jobs in these countries. The working class certainly exists. How else does electricity reach our homes or workplaces? How does water flow through our taps? Who drives public transport? Who serves us in the shops? Without the working class nothing would happen. Marx, however, does not romanticise any particular section of the working class or any particular form of industry.
There are millions under capitalism today involved in the ‘service sector’ and in ‘white-collar’ jobs who are not only wage-labourers, but who have also been forced to organise, unionise, and take collective action in defence of their conditions. Unlike the capitalists, they do not own the means of production and are forced to sell their labour-power in order to live. They are exploited as before, in that they receive less in wages than that which they produce for their employer.
Again, we see that the definition of the working class is a question of their relationship to the means of production, and is not simply a label to be pinned to on certain groups on the basis of a subjective appraisal.
In the process of production, the products of previous labour – existing use-values – are combined and turned into new use-values. “The same use-value is both the product of a previous process, and a means of production in a later process. Products are therefore not only results of labour, but also its essential conditions.”And it is this application of labour that gives life and vitality to use-values; without labour, objects will rust and decay over time, losing their usefulness and thus their quality as use-values. “Living labour must seize on these things, awaken them from the dead, change them from merely possible into real and effective use-values.”
The process of production is therefore also a process of consumption – productive consumption. However, Marx distinguished between this productive consumption – consumption of use-values for the creation of new use-values – and unproductive or ‘individual’ consumption, which whilst using up use-values, does not create any new use-values. Clearly this definition of productive or unproductive is from the standpoint of capitalism. “Such productive consumption is distinguished from individual consumption by this, that the latter uses up products as means of subsistence for the living individual; the former, as means of subsistence for labour.”
Such a distinction is important in light of modern Keynesian ideas of government stimulus. There are those who believe that a depressed economy can be resuscitated by simply paying workers to perform laborious but unproductive activities, whether it be digging holes in the ground, building roads to nowhere, or creating and dropping bombs. But such activity merely consumes use-values without creating any new use-value; it wastes productive forces without creating any new ones, acting not as source of real wealth, but as an almighty drain on the economy.
As explained, if equivalents are exchanged (and even if this rule is violated) surplus-value cannot arise from the act of exchange. It has to arise in production. Value is created by labour. The commodity employed to create value is labour-power. We therefore see the distinction between labour-power (the commodity) and labour (the use-value of labour-power).
By what means is the capitalist able to extract a surplus from his workforce? For instance, if the capitalist advances £1,000 in raw materials, machinery, and wages, then surely the total value of the product is merely equal to this £1,000. How does the capitalist class as a whole extract a surplus from the productive process?
Marx outlines the various arguments put forward by the apologists of capitalism to justify the role of the capitalists within society and their right to obtain a profit. Profit is said to be the reward to the capitalist for ‘taking a risk’; the compensation for providing means of production, for supplying jobs and means of subsistence to the working class; the payment for ‘overseeing’ the process of production.
Of course, such arguments are nothing but a “whole litany…simply meant to pull the wool over our eyes.”They are an attempt to justify this dog-eat-dog society. An army of consultants and advisers limit the so-called risks taken by the capitalists. The bigger the capitalist the less is the risk. Equally, far from providing workers with jobs and wages, the capitalists today are responsible for mass unemployment, demanding brutal austerity from their political representatives in power. What’s more, these wealthy ladies and gentlemen rarely play any role in production at all; far from ‘overseeing’ production, they are more divorced from production than ever, lying on some beach in the Bahamas, loosely connected to the real world through phone calls to their financial managers.
But, as Marx notes, the capitalists themselves are not the ones who feel the need to justify their money-making. “He [the capitalist] does not care twopence for it. He leaves this and all similar subterfuges and conjuring tricks to the professors of political economy, who are paid for it. He himself is a practical man, and although he does not always consider what he says outside his business, within his business he knows what he is doing.”
The capitalists are blinded by their own illusions. Their only interest is making money. They have a very hazy understanding of the source of surplus value. All they know is that they need to purchase labour-power from the worker. They know they have to squeeze as much surplus labour out of the workers. They know that they can sell the commodities produced by the workers for a greater amount than that paid to the worker in the form of wages. Surplus value, in other words, is simply the unpaid labour of the working class.
Under capitalism, exploitation is disguised. Our task is to reveal it. For example, if a worker and their family needs the subsistence created from the product of four hours labour, the wages they receive will be the money equivalent to four hours of labour. Thus in the first four hours of the working day, the worker creates new value equal to their wages. If the working day came to an end at that point, the capitalist would receive no surplus value. But the working day is not four hours but eight hours. The extra four hours is when the surplus value is created. So the production of surplus value is nothing more than the prolongation of work beyond the time needed to reproduce the value of labour-power.
“[T]he past labour embodied in the labour-power and the living labour it can perform, and the daily cost of maintaining labour-power and its daily expenditure in work, are two totally different things. The former determine the exchange-value of the labour-power, the latter is its use-value. The fact that half a day’s labour is necessary to keep the worker alive during 24 hours does not in any way prevent him from working a whole day. Therefore the value of labour-power, and the value which that labour-power valorises in the labour-process, are two entirely different magnitudes; and this difference was what the capitalist had in mind when he was purchasing the labour-power.”
“If we now compare the process of creating value with the process of valorisation, we see that the latter is nothing but the continuation of the former beyond a definite point. If the process is not carried beyond the point where the value paid by the capitalist for the labour-power is replaced by an exact equivalent, it is simply a process of creating value; but if it is continued beyond that point, it becomes a process of valorisation.”
“The trick has at last worked: money has been transformed into capital.
“Every condition of the problem is satisfied, while the laws governing the exchange of commodities have not been violated in any way. Equivalent has been exchanged for equivalent.”
Constant capital and variable capital
The labour of the worker is the source of value, and, in turn, the unpaid labour of the worker is the source of surplus value and therefore of profit. As the production process is also used to turn old use-values into new ones – what happens to the exchange-value of the old use-values contained within the raw materials and depreciation of machines, etc.? Marx explains:
“The workers adds fresh value to the material of his labour by expending on it a given amount of additional labour…On the other hand, the values of the means of production used up in the process are preserved, and present themselves afresh as constituent parts of the value of the product…The value of the means of production is therefore preserved by being transferred to the product.”
In other words, during the production process the worker uses up old use-values (raw materials, depreciation, etc.), whose value is transferred through to the new product. Through the worker’s labour, new products containing new values are also produced. Again, the source of all new value is the result of the extra socially necessary labour-time added in production.
“By the simple addition of a certain quantity of labour, new value is added, and by the quality of this added labour, the original values of the means of production are preserved in the product.”
The previous use-values – raw materials, wear and tear of machinery, etc. – that are consumed in the process of production contain previous socially necessary labour-time. While raw and auxiliary materials are completely consumed in production, all their value reappears in the new commodity, while instruments of labour (machinery), which are consumed gradually, transfer their value bit-by-bit as their use-value is worn away.
Here Marx makes the important distinction between ‘constant’ and ‘variable’ capital. Since all the capital advanced for the purchase of means of production simply transfers its value to the new commodities, without a change in its amount, Marx calls this ‘constant’ capital. Namely, those parts that “[do] not undergo any quantitative alteration of value in the process of production,”but simply transfer their value to the commodity. However, the capital advanced for the purchase of labour-power enters into the creation of surplus value. As this expands its value in the process of production, Marx calls this component ‘variable’ capital: “that part of capital which is turned into labour-power” and which “both reproduces the equivalent of its own value and produces an excess, a surplus-value, which may itself vary, and be more or less according to circumstances.”
It is only the variable capital, the application of new labour that adds value in the production process. This living labour creates new values. Materials used up in production only transfer their value through to the new product; meanwhile, machinery and equipment used to produce a multitude of commodities transfer their value over to the new products gradually over the lifetime of their productive use. This can be described as dead labour, as opposed to living labour of variable capital.
If a commodity could be produced purely by automation, taking in materials and transforming them into new products simply using machinery without any labour, then – presuming that the law of value was free to operate – such a commodity would have a value equal to that of the materials and machinery used in its production. Equally, if a product can be obtained from nature without any labour – for example, by simply picking it up from the ground or plucking it from the tree – then it has no exchange-value.
Under capitalism, competition and the drive for greater profits forces the capitalists to continually try to reduce both the constant and variable parts of their capital advanced. By reducing either or both, an individual capitalist can sell their commodity at a price below the current social average value, thus undercutting their competitors, gaining a greater market share, and creating super-profits. This competitive process is what drove capitalism forward in its heyday, allowing it to develop the means of production to extraordinary levels, with the continual reinvestment of profits into new science, technology, and techniques that reduce the costs of constant capital, whilst also increasing the productivity of labour and thus producing more use-values for a given quantity of variable capital.
But this progressive quality of capitalism at a certain point also turns into its opposite and creates the conditions for its own crises. With the replacement of labour by machinery to competitively reduce costs, a dual problem occurs.
Firstly, it is only the application of labour – i.e. of variable capital – that has the power to create new value and thus surplus-value. A production line solely consisting of machines would simply transfer bit-by-bit into commodities the huge investments made in terms of constant capital. A fully automated plant would still have been created by human labour, but could only transfer its own fixed value. As labour is replaced by machinery within the productive process, therefore, there is a downward pressure on the surplus-value (and thus the profits) that the capitalist class are able to obtain.
The same is true of all machinery, no matter how sophisticated. Nevertheless, despite automation, a plant will need to be maintained, supervised, repaired or replaced by human labour. This will of necessity be very highly skilled labour, which would transfer even more value. Where lines or branches of industry are automated, they can capture greater amounts of surplus-value by producing below the socially necessary average, sharing in the total mass of surplus-value created in society according to their share of the total capital. But the automated plant can only function as part of social production, not as isolated parts.
The idea of total automation, where the working class is excluded altogether from production, is a nonsense. It is the variable capital – the wages paid to workers – that forms the demand for the commodities produced within the capitalist mode of production. This is the second problem created by the replacement of labour with machinery: as workers are made redundant by machines, who will have the money to buy the goods being churned out? Robots, for all their productivity and efficiency, cannot buy things.
Thus, we see how capitalism sows the seeds for its own demise. This does not arise due to the individual qualities or mistakes of the capitalists, but as a result of the coercive laws and inner logic of capitalism itself. Only by replacing these laws of production with a different set of laws – of those based on a rational and democratic plan of production; driven by the fulfilment of society’s needs, not by profit – can we put an end to the continual crises of overproduction that capitalism inflicts upon humankind, throwing us back into a state of barbarism and poverty amidst plenty.
2 p247-248, our emphasis