If you work in a job I’m sure it wouldn’t take you long to think of plenty of times when your employer has taken liberties – asked you to do overtime without pay, trimming your lunch and break times, etc, etc. At the same time, ever very low paid workers in Britain are some of the “lucky ones” on the world scale. For example, in the new Chinese MG car factories the workers are paid just £5 a day.
These “sweatshops” are infamous examples of the unfairness of capitalism. You don’t have to be a socialist to be disgusted at the super exploitation workers there suffer and think they should get a ‘fair’ wage. However, what many people don’t know is that there is no such thing as a ‘fair’ wage – at the core of the capitalist system is fundamental exploitation, which turns the labour of the many into the profit for the few.
Karl Marx was able to show this by drawing on the ‘labour theory of value’ that was first developed by the British economist Adam Smith. He was a supporter of capitalism and his followers today, like the ‘Adam Smith Institute’, don’t support the idea of the ‘labour theory of value’. So, if right wing institutes are running a mile from the labour theory of value, its worth asking: what is it and what does it tell us about capitalism?
What does the labour theory of value say?
The vast majority of things that we make and use are known as commodities. They must have both a use value and an exchange value.
To have a use value means they satisfy the needs of at least a section of society i.e. have a use! To have an exchange value that can be compared to the values of all other products i.e. what it can be exchanged for! Of course, different commodities have different exchange values, e.g. I’d need to exchange a lot of bread in order to buy a computer.
How do we determine how ‘expensive’ a commodity is then?
Marx determined that the price of a commodity is proportional to the amount of labour used to make it by someone with skills average to the rest of the workforce. That is the amount of time taken to transform raw materials in to the product on the shelf. When you see all commodities, everything that we buy and use from food and clothing to iPods and barbies, it becomes obvious that it is the working class who run society produce all the things we consume.
Why is the working class poorer? Surely if we make everything then we should be the ones benefiting. This can be explained by looking at what we get paid when we go to work: wages.
Wages are what the capitalist pays the worker for working a certain period of time, i.e. a specific amount of labour power. Labour power transforms raw materials into the goods you see on the markets and in the shops. The price of these commodities is always higher than the wages paid to the worker producing it because we don’t sell labour – only labour power.
This is because of how wages are determined. Workers are like machines to the capitalist. To maintain production on a machine, you have to build it, give it fuel, service it, and buy new ones when the original wears out. This is the same for workers. The boss pays you the amount you need to become a worker (the training needed), the amount you need to survive so you can come back to work the next day, and the amount you need to have children, who will later become workers. They don’t need to pay any more, and if they pay too much then you won’t have to work the next day in order to survive.
Overtly this looks like a fair deal between worker and boss – like a contract. This is how capitalism is presented to the working class. But in reality it is wage slavery.
Labour power, unlike all other commodities, can increase the value of other commodities. It transforms otherwise worthless raw materials into billion dollar industries. If we’re only paid for our ability to work, and not the work we do, then where does the surplus value (extra value) go?
The surplus value goes to the capitalist as profit. The capitalist has not contributed anything to the labour process, and therefore this is a form of parasitism. Profit is the unpaid wages of the working class.
Right wing economists claim that the profit is the reward that the capitalist gets for the risk of putting up the money to start a business. This is misleading. Of course, the capitalist does take a risk in putting his money into a new business but it doesn’t tell you where his money came from in the first place. It is because all value in production comes from labour power, it must have been accumulated through exploitation – just like all other profit under capitalism.
In this sense, the money put up is “old profit” and the capitalist is still parasitic on a production process to which he does not added any value. In fact, it is the workers who risk being unemployed if the business falls through. Countless examples of bankrupt businesses show that when a company goes under the bosses jump ship early and take any last profits they can and the workers are left unpaid and unemployed. It is not the bosses who take the biggest risk; but they always gain the most!
The workers can fight back. Capital cannot accumulate or be invested; products cannot be bought and sold, without labour power. Our greatest asset is our ability to withdraw labour in a strike. If in an indefinite general strike, workers can bring society to a halt, then it shows our ability to run society.
We need to end the capitalist system. A socialist economy, planned for need not greed and run by the working class itself, would be far more efficient than the current market economy.
Those who work would receive their fair share, because the bourgeoisie, who extracted surplus value without contributing anything, will no longer exist.