Get your own Free Home Page In all societies individuals perform some social labour for their own sustenance. In a commodity economy, labour of individuals does not directly appear as social labour. It becomes social only because it is equalised with some other labour, and this equalisation of labour is carried out by means of exchange _ exchange with money.
Miners’ labour and the labour of computer professionals are not the same. However, they are equalised by means of exchange i.e. different kinds of labour are equalised through the market. In exchange the concrete use values and the concrete forms of labour are completely abstracted. Thus in commodity production labour appears as abstract and socially necessary labour. It appears as human labour in general.
What is a commodity ?
A commodity satisfies human wants of some sort or other. The nature of such wants, whether they spring from the stomach or from fancy, makes no difference. Commodity is a thing which has :
a) use-value i.e. an utility which is a quality, and
b) exchange-value i.e. a quantitative relation between it and money or between it and other commodities.
4 It has exchange value because a certain quantity of human labour is expended in its production, or it embodies human labour i.e. it has value.
4 A thing can be a use-value without having value whenever its utility is not due to labour, such as air, virgin soils, natural meadows etc.
4 A thing can be useful and a product of human labour without being a commodity e.g. when one directly satisfies one’s own wants with the produce of one’s own labour or satisfies others’ wants directly without the mediation of the market.
4 In order to produce a commodity, one not only has to produce use-values but use-values for others _ social use-values whose social usefulness is realised by means of exchange in the market.
4 Lastly, nothing can have value without being an object of utility. If the thing is socially useless, so is the labour contained in it. This labour does not count as social labour and therefore creates no value. By the way, socially useful implies that the activity has utility for the perpetuation of commodity economy and so is often misanthropic.
As a general rule, articles of utility become commodities only because they are marketable products of personal and family labour or of wage-workers’ labour. The sum total of the labour of all these labourers forms the aggregate labour of commodity producing society i.e. total social labour. Since the production units do not come into contact with each other until their products are exchanged, the specific social character of each producer’s labour does not show itself except in the act of exchange. In other words, the labour of individuals asserts itself as a part of the labour of society only by means of the relation which the act of exchange establishes directly between the products, and indirectly through them between the producers.
We live in a world where the relations of commodity production have not only taken control of production of goods but have also permeated our very beings. Most social relations are mediated through the logic of the market. Almost everything has an exchange value a cost and a price. Mercifully, resistances to this exist.
Value of a commodity is the socially necessary labour time required for its reproduction. Reproduction, and not production, because social production is essentially repeated production of goods wherein each new sequence of production the productivity may change. And along with it the socially necessary labour time for the creation of the product will change effecting the value of the commodity.
Exchange of commodities when termed as exchange of equivalents means that the socially necessary labour time required for the reproduction of the two commodities are equated. For example, a person expends twenty hours of labour (at average intensity) to produce a watch; another person expends ten hours of labour (at average intensity) to produce a pair of shoes, then two pairs of shoes could be exchanged for a watch. Shoes and watches are exchanged through the medium of money and market. Money is both a measure of value and a medium of circulation.
Circulation of commodities means the continuous metamorphosis of commodities _ a change of one form of value into another. A continuous process of change from commodity-form to money-form and back again to commodity-form. Circulation being just a change of form of value adds no value to the commodity.
It may appear that in circulation a seller may earn profit by arbitrarily fixing price but competition is a leveller. Arbitrary levels of price of a commodity are smoothened out and brought to an average price level which in turn is determined by the socially necessary labour time required for its reproduction.
It may also appear that competition fails to level when all producers do the same i.e. earn profit by arbitrarily fixing price. But then :
a) it is forgotten that a seller is also a buyer. What one earns by selling at a higher price, one will lose while buying.
b) when all producers increase prices then the monetary proportion of prices of different commodities remains the same. The result simply is that the buying capacity of money falls. The question of adding value to the commodity does not arise.
Commodities on an average exchange at values only in simple commodity production. In capitalist commodity production, in general they do not exchange at values. In conditions of the dominance of individual-owned production enterprises which Marx analysed, commodities were exchanged at production prices (cost price + average rate of profit : see concept notes ‘g’, ‘Average rate of profit and its tendency to fall’, pg.41). Production price though is determined by value via average rate of profit.
In certain goods (softwares, music, books, films, seeds) in which the reproduction of the commodity does not consume much labour, the price has no relation with the labour time required for their repro- duction. These goods are maintained as commodities by forcibly curtailing their reproduction. Free distribution of goods is a threat to the rationale of commodity economy and therefore attempts are made to obliterate such possibilities by ludicrous copyright acts and patent laws.
In a commodity economy, a production unit is constituted by production processes producing goods for the market. The production unit may involve :
a) the labour of an individual or of a family or a domestic unit (simple commodity production)
b) the labour of wage-workers (capitalist commodity production)
In case ‘a’ the output can be seen as Ov + Nv, where Ov (old value) stands for the value of the used up means of production + raw materials + other materials of production and Nv stands for the new value added. The new value here is not surplus value. New value is the materialised form of necessary labour and surplus labour. Necessary labour is for the sustenance of the producer i.e. the domestic unit or the family. And surplus labour is divided into the merchants’ margin, the usurers’ return, rent, interest and taxes; and whatever remains is used for the improvement of the means of production and the well being of the producers.
In case ‘b’ the output can be seen as c + v + s, where ‘c’ stands for the value of the wear and tear of the means of production in the production process, raw materials and other materials of production; ‘v’ is equivalent to wages; and ‘s’ is the surplus value extracted. A part of the surplus value is used for expansion of production. And the rest is divided up amongst taxes, interest, rent, profit, managerial salaries, cuts & commissions, etc. Here necessary labour takes the form of ‘v’ and surplus labour takes the form of surplus value ‘s’.
Like in all societies where surplus is extracted from the producers, the continuance of production requires the presence of disciplining authorities and state apparatus to break the resistances and to counter the struggles of producers. Disciplining institutions like schools & universities, family, media etc. repress deviant “unproductive” behaviour, impose compliance to the order of things, define & manage dreams & aspirations and lend a timeless transcendental quality to the present. Managements, judiciary, political institutions, prisons, military and police are all necessary elements of coercion & control to break resistance and subversion by labourers which the extraction network entails.
These institutions of discipline, coercion and control hack off huge parts of the surplus produce for their own regeneration through taxes & duties, interest, rent, profit, managerial & bureaucratic salaries and cuts & commissions. The managers of discipline, coercion and control constitute the managements of extraction (or the representatives of capital). A conservative estimate of their total share would be 85 to 90 percent of the total produce !
The value of a commodity, say its price, or, the value of the ability to do labour, say wage, is effected by biological, social & cultural existence and the political & historical ambience. This value is determined by the collective resistences or assertions of the labourers. What is implied is that the definition of the necessities of a labourer (basic requirements of life) are under incessant contention. In general, weaker the individual & collective resistences of the labourers, lower their value i.e. cheaper the labour power. Capitalist commodity production is the disciplined and coerced production for the market using wage-workers. Production units are run by managements of various hues who control the means of production (the accumulated labour) required for running the production process. Wage- workers sell their labour power, their capacity to do useful work, for a specified wage under an ubiquitous discip-lining grid. The wage, the price at which labour power is sold, is an outcome of struggles between wage-workers and the managements of extraction.
Labour power or the capacity to perform labour is the com-modity whose potential usage possesses the unique property of being a source of value. Labour power’s actual consumption is therefore in itself a process of embodiment of labour, and consequently a creation of value. The value of labour power is determined by the means of subsistence necessary for the maintenance of the labourer socially. It resolves into the value of a definite quantity of the means of subsistence and other socially necessary goods. It therefore, varies with the value of these goods i.e. with the quantity of labour requisite for their production. (As per Marx, wages on an average represent the value of labour power. But it may be pointed out that the reproduction of wage-workers is also supported from within simple commodity production. Children of peasants and artisans become wage- workers. Wage-workers often continue as members of peasants’ and artisans’ families. Therefore, the wages do often represent a lesser amount than the value of labour power. This was important throughout the world and is still important in large areas. It also needs to be added that the term value of labour power has undergone drastic changes in social meaning with the increasing number of women wage-workers. Man’s wage is no longer the family wage. Even with shrinking size of domestic unit, reproduction of labour power requires wage-work by both man & woman. )
Be as it may, the value of labour power and the value which the labour power creates in the labour process are two different magnitudes. Labour power is the source not only of value but of more value than that it has itself. Wage-workers produce far more products for exchange than the amount represented by their wages. This extra materialised labour extracted out of labourers is known as surplus value. In capitalist commodity economy there exist no other means of profit than the extraction and realisation (through sale) of surplus value. (But other social formations exist beside capitalist commodity production. Outright loot of non-commodity economies has been a hallmark of capitalism. It continually appropriates a part of the new value of the simple commodity producers through taxations and interest payments. In addition to a part of their new value, capitalism continuously gobbles up their means of production like land, water and labour power.)
Output of a commodity producing unit using wage labour can be put as c + v + s, where ‘c’ is the value equivalent of the used up raw material and other materials of production plus the wear and tear of the means of production during the production process; ‘v’ is the value of labour power which is equivalent to the wage; and ‘s’ is the surplus value. Surplus value can be increased by increasing the working day, increasing work intensity, lowering the wage and by increasing the productivity.
If wage is represented by ‘v’ and ‘s’ is the surplus value, then (s ¸ v) x 100 { i.e. (surplus labour ¸ labour equivalent to wage) x 100 } is termed as the rate of exploitation. This rate has undoubtedly crossed the 5000 mark in the present, which can be verified by going through the balance sheet of any enterprise. In actual terms it means : out of an eight hour shift, 8 to 10 minutes work is sufficient to produce goods equivalent to the wage, and the rest is all extraction of surplus labour by the managements of extraction.
Wage is a continuous and tenuous imposition on the wage worker. So is the duration and intensity of labour. Two forces are constantly pitted against each other in determining two things:
One, the share of the produce that the wage-worker receives.
Two, the level of exhaustion and depletion which the worker is forced to undergo.
What are these two forces?
On one side is the force of a multipronged machinery of coercion, control and discipline to monitor and expand the network of surplus value extraction. The axial components of this machinery are :
a) Management which looks after the day to day supervision and control of production and extraction, and devises further methods of intensification.
b) Police which is responsible for the day to day supervision of the home- workplace-marketplace grid. It also provides routine protection to the management.
c) Legal Apparatus which lays down the paradigm of legality-illegality to define wage-workers’ actions and subsequent repression.
d) The representatives who attempt to channelise the anger and grievances of wage-workers so as to perpetuate the rule of hierarchies and extraction. Representation works by the method of delegation of power and is very central to the rule of the market economy .
e) Mass media _ which defines what is desirable, or disruptive, by systematic control of perspectives with which to view events.
f) State _ anchored on standing army, its essence is repression with or without a camouflage of arbitration. Also asserts control over the flexibility of the wage i.e. purchasing capacity of the wage. Its functions of surveillance and control are routine.
The contending force is the wage-workers’ individual and collective strength to resist and subvert the machinery of control. The outcome of incessant struggles over work intensity, working time, working day, working conditions and living conditions determines the average socially necessary labour time for the reproduction of a good by effecting labour productivity.
A strong assertion of individual and collective defiances of wage-workers will result in a lowering of the productivity of labour. Lower will be the exhaustion, depletion and distress.
N Higher discipline and control ® higher labour productivity ® higher exhaustion and depletion M Greater individual & collective ® lower labour productivity resistances by wage-workers ® lower distress
Every society is a system of distributed labour i.e. labour allocated in various branches of production to fulfill the existing social requirements. In commodity economy, market is the mechanism through which distribution of social labour among the various branches, corresponding to the given state of productive forces, takes place. Law of value is the theorisation of the market mechanism.
All the different kinds of labour which are carried on independently of each other are continuously reduced to the quantitative proportion in which the existing hierarchical society requires them. In the midst of all the accidental and ever fluctuating exchange relations (purchases and sales) between the products, the labour time socially necessary for their reproduction forcibly asserts itself. The commodity producing unit makes products for sale i.e. for the market, which today encompasses the whole world.
Before the emergence of capitalist commodity production, in conditions of simple commodity production, at equilibrium the exchange of different commodities is according to the socially necessary labour time required for their reproduction i.e. at their values. The average prices of products are proportional to their value. In other words, value represents that average level around which market prices fluctuate, and with which the prices would coincide if social labour were proportionally distributed among the various branches of production as per the prevailing productivity of labour and market requirements.
Commodity economy is constantly in a state of dynamic disequilibrium. Overproduction leads to a fall in price below value and underproduction has the reverse effect. These lead to contraction of production in the former and expansion in the latter case. Deviation in market prices from values is the mechanism by which over-production and underproduction is removed. Any change in productivity of labour changes the socially necessary labour required for the reproduction of the commodity i.e. the value changes and this changes the distribution of labour by transfer of labour and resources between branches of production. Thus far simple commodity economy.
Capitalist commodity production is production for the market using wage- workers. In conditions of the dominance of individual-owned production enterprises, analysed and focused on by Marx, the exchange of commodities is in general not according to their values but according to their price of production, which is their cost of production plus average profit. Price of production is derived from value but is in general not equal to value. This is because the organic composition (C:v) of capital is different in different branches of production. This in turn would lead to different rates of profit (s/[C+v]) in different branches but an average rate of profit is arrived at (see concept notes, g ‘Average rate of profit’, pg. 41). This process of formation of average rate of profit does not allow commodities in general, to be exchanged at their values. The price of production performs the same social function which the market price determined by labour expenditure performs in conditions of simple commodity economy. Average rate of profit is the total social surplus value divided by the total capital or the total social investment. Any increase in productivity in any branch of production would lead to an increase in profit from the average, and that would engender a redistribution of investments till profits are again equalised. And through this transfer of investments, distribution and redistribution of labour and resources take place. The distribution of social labour is influenced by the distribution of investments through price of production. The productivity of labour influences the price of production through value.
Marx explicitly removed joint-stock production enterprises in deriving the average rate of profit. Marx focused on the operation of the theory of value in the dominance of individual-owned factories for whom the rate of profit was decisive. How the conceptualisation of the theory of value can operate in the present, i.e during the domination of stock, limited, and state enterprises has to be worked out.
The value of a commodity produced by a capitalist enterprise is equal to c + v + s, where ‘c’ is equal to the materials of production and the wear and tear of instruments of production, ‘v’ is the wage paid to workers in the production process, and ‘s’ is the surplus value (i.e. unpaid labour) extracted. c + v is termed as the cost of production. Total instruments of production (not just the wear and tear) and materials of production, say, is represented by ‘C’. Rate of profit ‘p’ of an individual- owned capitalist enterprise then is equal to s/(C+v).
C:v is termed as the organic composition of capital. In general, keeping the intensity of labour constant, lower the organic composition higher is the surplus value produced per unit investment, and therefore higher is the rate of profit.
Different rates of profit in different enterprises would lead to mobility of capital to the branches with higher rates of profit. But mobility is constrained by social requirements which stress themselves through fluctuations in the market. Aside from nonessential, incidental and mutually corresponding differences, differences in the average rate of profit in the various branches of industry do not exist for long in reality, and could not exist without destabilising the system of individual owner based capitalist production. Competition and mobility of capital leads to the formation of an average rate of profit _ equal profit for equal investment. The average rate of profit is not a simple but a weighted average. This depends on the relative magnitude of capital invested, ‘C’, in each particular sphere (individual- owned), or on the aliquot part which the capital invested in each particular sphere forms in the average social capital. (C1+v1) x p1 + (C2+v2) x p2 + ----- +(Cn+vn) x pn Therefore, average rate of profit = ------------------------------------------------- (C1+v1) + (C2+v2) + ------ + (Cn+vn) where ‘n’ is the total number of individual-owned capitalist enterprises and Ci , vi and pi (i ranges from 1 to n) are the C, v and p of each individual-owned capitalist enterprise.
It must be pointed out that Marx excluded stock companies (like railways) from the schema of the formation of average rate of profit. Cost price + average rate of profit on the total investment is termed as price of production.
The direct interest taken by the capitalist of any individual sphere of production is confined to making an extra gain, a profit exceeding the average _ by reducing the cost price. This leads to increase in productivity. Increase in productivity means that the same quantum of labour yields, in a given time, a greater quantum of product. This is brought about by either increasing the intensity of labour or by increasing the scale of production by using more and more of labour saving machinery. This means increase in ‘C’ relative to ‘v’ and ‘s’. With the increase in ‘C’ the rate of profit falls. The social generalistion of this process leads to the tendency of the average rate of profit to fall.
This tendency for Marx was ‘the law’ which posited objective limits to capitalism.
It is assumed that there is one mode of production i.e. the capitalist mode of production and there are two classes, one the wage-workers and the other, the capitalists & their hangers-on [what Marx termed as hangers-on would today include bureaucrats, politicians, supervisors, managers, professors, technocrats, lawyers, judges, etc.]. The problem is studied by considering production in specified time periods, each one being called a cycle.
The product of total global capital in a cycle may be considered as c + v + s, where ‘c’ is the value of the machinery (the wear and tear) and raw materials used up during production process (which here is the global sum of all production exploiting wage-workers), ‘v’ the variable capital, is the value equivalent of the total wage paid to workers in the total production process, and ‘s’ is the total global surplus value (i.e. unpaid labour) extracted.
If the next cycle of production is on the same scale i.e. if simple reproduction is to take place, then ‘c’ replaces the used up machinery and raw materials, ‘v’ is equal to the goods to be consumed by wage workers i.e. equivalent to the total wages, and ‘s’ is consumer goods, instruments of offense and defense and luxury and ideological goods consumed by the representatives of capital.
But if the next cycle of production is to expand i.e. extended reproduction is to take place then a part of the total global surplus value ‘s’ is not to be consumed but accumulated. The proceeds of its sale have to be used for buying materials and labour to extend production.
This realisation of surplus value to be accumulated is the problem which Marx’s critique could not grapple with. Workers can only realise the variable capital ‘v’; and the representatives of capital amongst themselves can realise only that part of the constant capital which will be used up ‘c’ and the part of the surplus value which will be consumed. The workers and representatives of capital cannot possibly realise that part of the surplus value which is to be capitalised i.e. accumulated. For the workers cannot possibly consume more than what they get as wages, ‘v’, and the representatives of capital would not consume all of the surplus value extracted for they need to sell it and extend production.
Therefore the realisation of the surplus value for the purpose of accumulation is an impossible task for a closed capitalist society i.e. a society which has only the capitalist mode of production. There has to be a strata of buyers outside capitalist society i.e. other commodity producers which Marx had already abstracted off.
One only has to analyse the history of commodity production and the production of commodities by peasants and artisans to recognise that there exists a huge strata of non-capitalist commodity producers who produce goods for the market using personal and family labour (without the use of wage-labour).
Capitalist production supplies consumer goods over and above its own requirements (the purchasing power of its workers and the demand of the representatives of capital), and means of production in excess of its own demand which are bought by non-capitalist strata. And through these transactions a part of surplus value is realised. This makes possible accumulation and extension of production of global capital.
Surplus value to be accumulated is realised outside capitalist commodity production, either mediately or immediately. One sector of production may directly realise surplus value by selling its products to simple commodity producers and with the ensuing expansion of production other sectors realise their surplus values in the purchases and sales within the capitalist mode.
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