Tania Khatun

INTRODUCTION:

Surplus Value is the social product which is over and above what is required for the producers to live. The measure of labor is labor time, so surplus value is the accumulated product of the unpaid labor time of the producers.  

The theory of surplus value was proposed by German philosopher and economist Karl Marx. It is a concept in Marxist economics that focuses on the difference between the value of labor power (wages) and the value created by the laborer in the production process. 

Marx argued that capitalists extract surplus value by paying workers less than the value they produce, and this surplus value is the source of profit for capitalists. This theory is an essential element of Marx’s analysis of capitalist exploitation and the dynamics of the capitalist system.

 

DEFINITION OF SURPLUS VALUE:  

According  to  Marx :-

Marx believed that the price of a commodity need to be determined according to the labor invested in it. He held that the basis of wealth is labor. The laborers produce wealth with their labor, but the capitalists does not give them equal share of their profit.

The capitalists are in a position to establish big industries, whereas the laborers cannot. They (laborers) are compelled to sell their labor and get employment in the factories established by the capitalists. The capitalists sell the finished goods at a high rate and give insufficient wages to the laborers.

The difference between the costs of the finished goods and their sale price is called profit. This process of earning profit is called ‘the theory of Surplus value’. 

Marx held the view that this profit should go to the laborer and not to the capitalist, because labor is one of the basis for production of all types of wealth. 

Marx’s own discussion focuses mainly on profit, interest and rent, largely ignoring taxation and royalty-type fees which were proportionally very small components of the national income when he lived.

Marx himself considered his theory of surplus-value his most important contribution to the progress of economic analysis (Marx, letter to Engels of 24 August 1867).

It is through this theory that the wide scope of his sociological and historical thought enables him simultaneously to place the capitalist mode of production in his historical context, and to find the root of its inner economic contradictions and its laws of motion in the specific relations of production on which it is based.

 

 

SURPLUS VALUE ACCORDING To KARL MARX:

Marx’s analysis of surplus value centers on the distinction between labor and labor power. The worker sells labor power and is paid the value of his labor power. What the capitalist gets from the worker is value creating labor.

If workers were paid for their labor, for the value they create, they would either be paid in full, leaving no surplus value, or they would be paid less than the value created, which would apparently be a violation of the principle that value is exchanged for value. 

Either way, it would not be possible to explain capitalism in terms of the exchange of equal values.

 

The problem of explaining the source of surplus value is expressed by Friedrich Engels as follows:-

“When does come this surplus-value? It cannot come either from the buyer buying the commodities under their value, or from the seller selling them above their value. For in both cases the gains and the losses of each individual cancel each other, as each individual is in turn buyer and seller.

Nor can it come from cheating, for though cheating can enrich one person at the expense of another, it cannot increase the total sum possessed by both, and therefore cannot augment the sum of the values in circulation.

This problem must be solved, and it must be solved in a purely economic way, excluding all cheating and the intervention of any force — the problem being: how is it possible constantly to sell dearer than one has bought, even on the hypothesis that equal values are always exchanged for equal values?”

 

Marx himself also put the problem as follows:-

“If the exchange-value of a product equals the labor-time contained in the product, then the exchange-value of a working day is equal to the product it yields, in other words, wages must be equal to the product of labor. But in fact the opposite is true.

Ergo, this objection amounts to the problem, — how does production on the basis of exchange-value solely determined by labor-time lead to the result that the exchange-value of labor is less than the exchange-value of its product?

Marx’s gave his solution for this problem. His suggestion was to distinguish between labor-time worked and labor power. A worker who is sufficiently productive can produce an output value greater than what it costs to hire him.

Although his wage seems to be based on hours worked, in an economic sense this wage does not reflect the full value of what the worker produces. Effectively it is not labor which the worker sells, but his capacity to work.

For an example:-

“Suppose a worker who is hired for an hour and paid Rs. 50. Once in the capitalist’s employ, the capitalist can have him operate a boot-making machine using which the worker produces Rs. 50 worth of work every fifteen minutes.

Every hour, the capitalist receives Rs.200 worth of work and only pays the worker Rs. 50, capturing the remaining Rs. 150 which, after deduction of costs (the leather, depreciation of the machine, etc.) leaves a remaining, i.e. surplus value or profit”.

The worker cannot capture this benefit directly because he has no claim to the means of production (e.g. the boot-making machine) or to its products, and his capacity to bargain over wages is restricted by laws and the supply/demand for wage labor. 

Hence the rise of trade unions which aim to create a more favorable bargaining position through collective action by workers.

 

 

Marx Labor theory of Value:-

According to Marx’s labor theory of value, human labor is the only source of net new economic value, but is also indispensable for the conservation and transfer of economic value (maintenance and redistribution of capital assets). 

Asset revaluations according to this theory only redistribute claims to product-value which has already been created previously.

 

 

Absolute and Relative Surplus Value:

According to Marx, the unnecessary labor time in which the worker recoups for the capitalist the value which the capitalist has not paid wages for creates surplus value.

The rate of surplus value can be increased by lengthening the working day so that more surplus-labor is extracted on top of a given amount of necessary labor.

Surplus value can equally be increased, within the limits of a given working day, if necessary labor-time can be reduced, that is, if the value of labor power falls.

 

According to Marx,

Absolute surplus value is obtained by increasing the amount of time worked per worker in an accounting period. Marx talks mainly about the length of the working day or week, but in modern times the concern is about the number of hours worked per year; and relative surplus value is obtained mainly by reducing wages 

— this can only go to a certain point, because if wages fall below the ability of workers to purchase their means of subsistence, they will be unable to reproduce themselves and the capitalists will not be able to find sufficient labor power; by reducing the cost of wage-goods by various means, so that wage increases can be curbed; by increasing the productivity and intensity of labor generally, through mechanization and rationalization, yielding a bigger output per hour worked.

Surplus value that derives from a reduction in necessary labor-time is called Relative surplus value, distinguished from Absolute Surplus Value, which results from a lengthening of the working-day. 

It is however necessary to understand that it is not possible to identify one part of surplus value as relative and another part as absolute without a starting point.

 

 

Different Concepts used by Marx in the theory of Surplus Value:

Labor

Labor according to P. Savchenko, has always been a domain of exchange between man and nature. Objectively to man’s vital activity, labor is his eternal companion and a most important factor in the evolution of world civilization

The instruments and objects of labor essential to manufacturing the things that man needs are material elements of the labor process. In their totality, they constitute the means of production.

The excess value created by the wage-workers over and above the value of their labor power is referred to as Surplus Value: It is appropriated by the capitalist without remuneration. 

That explains why surplus value is the goal of capitalist production from the capitalist’s point of view only that labor is productive which produces surplus value and increases his capital.

 

The concept of Value :

To understand the importance of value in the concept of Surplus value, it is important to brief about Marx’s theory of Value. According to this theory, the main postulates emphasized by Karl Marx are:

  1. Commodity production is the outcome of a specific division of labor: “Only such products can become commodities with regard to each other, as result from different kinds of labor, each kind being carried on independently and for the account of private individuals”
  1. The value of commodities expresses what private labors have in common: it is a socially necessary quantity of labor.
  1. Exchange relations are the manifestation of the social character of value: “If we bear in mind that the value of commodities has a purely social reality (…)it follows as a matter of course, that value can only manifest itself in the social relation of commodity to commodity”

Valorization

Valorization thus specifically describes the increase in the value of capital assets through the application of living, value-forming labor in production. The valorization of capital is a concept created by Karl Marx in his critique of political economy. 

In modern translations of Marx’s economic writings, the term valorization is preferred because it is recognized that it denotes a highly specific economic concept. 

It refers both to the process whereby a capital value is conferred or bestowed on something, and to the increase in the value of a capital asset.

A value creation process which goes beyond the point at which the worker has just created the equivalent of the value of his own labor power, and begins to increase the value of capital, is a valorization process, not just a value creation process.

 

 

Rate of Surplus Values:-

The rate of surplus value is also called as “percentage of surplus value” and ‘degree of exploitation’ as well.

When the workers get down to work, they have to perform, for some time, work that is equivalent to the value of wages. This portion of the work is one that has to be performed for their own sake. 

Workers have to do this portion of work. For laborers, this is the portion of necessary labor. After the completion of work that is equivalent to the value of wages, whatever work that is performed thenceforth, the whole of it will be not for the sake of the workers but for the sake of the capitalist. 

Which means, after getting down to work every day, workers perform ‘necessary labor’ for some time and ‘surplus labor’ for some more time. Neither the capitalists nor the workers know that the work done daily thus consists of two portions.

If the working day is ’12 hours’, it may have 6 hours of necessary labor and 6 hours of surplus labor. Or there may be 4 hours of necessary labor and 8 hours of surplus labor. These two portions might thus be of any portion.

It is the “rate of surplus value” that expresses the ratios of the two portions of labor in a ‘working day’. By means of ‘this rate’ one can know how much work the workers have done for themselves and how much for the exploiters. 

This rate of surplus measures ‘exploitation’ just as a thermometer measures ‘heat’. It reveals the degree of exploitation. The rate of surplus value can, therefore, be called as ‘degree of exploitation’.

‘Surplus value’ will be known only if the expenditure spent initially on the commodity and the value at which the commodity is sold are known. Thus, the rate of surplus value will be known if the proportions of wages and surplus value are seen.

The rate of surplus value is represented by the following formulae:

Surplus value (s/v)   =     surplus value =   surplus labor

 

 

CONCLUSION:

Surplus Value is critical to the expansion of capital. The specific economic form, in which unpaid surplus labor is pumped out of direct producers, determines the relationship of rulers and ruled. 

The overall conclusion after going through the Marx concept of Surplus Value is that, the theory is relatively important in the support of the laborers but when it comes to the owners, this theory has its own week points. 

It does not completely support or is against the system of capitalism. The concept in this theory is not practically possible.

 

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