Saturday, February 13, 2016

Debunking Marx’s Concept of Exploitation based on Surplus Labour Value

The working day under Marx’s theory in volume 1 of Capital can be conceptualised in the diagram below, where there is a total working day of 12 hours.

Although the total working day in any particular industry can be variable, there are two parts of the working day as follows:
(1) necessary labour-time, which is “determined by the working time required for the reproduction of the labour-power of the labourer himself” (Marx 1906: 256), and

(2) the surplus labour-time (Marx 1990: 341).
Let us assume that the concept of abstract socially necessary labour time is coherent and empirically relevant for the sake of argument (even though the concept is incoherent, cannot be properly defined and is empirically irrelevant).

Exploitation for Marx, in its most important sense, arises from the (alleged) manner in which capitalists tend to pay only a wage equal to the value of labour-power, which is the value of reproduction and maintenance of workers, and so this allows the capitalist to steal the value of surplus labour time. Capitalists can increase this exploitation by increasing the total working day to extend the surplus labour time of workers (and so gain more absolute surplus value) or decreasing the real wage equal to the value of reproduction and maintenance of workers (which is called by Marx relative surplus value).

Again, the worker tends to be paid a wage equal to the time taken during the working day necessary for the reproduction and maintenance of labour-power, and the hours of the working day beyond this represent the surplus labour time, whose value is surplus labour value extracted from labour.

But note carefully: this theory only works if real world wages of labour tend to equal the value of reproduction and maintenance of workers, which is a type of subsistence wage.

However, wages even for workers have soared above subsistence levels, and clearly did so even in the 19th century, as noted here. Moreover, the total working day has fallen in the long run even as real wages have soared.

Once we see that workers, generally speaking, are paid well above subsistence levels and in the long run their real wages are rising, Marx’s theory of increasing exploitation based on surplus value implodes, because if people are being paid more and more above subsistence level, then they are being paid more and more for their surplus labour time, sometimes for all their surplus labour, and in some cases perhaps even more than their surplus labour time.

For example, in Germany the poverty line for a worker and spouse with two children is a monthly income of €1,873. However, it is clear that even this income provides a standard of living that is vastly better than the subsistence wage equal to the value of labour-power imagined by Marx, and moreover it can buy all sorts of goods that would have been considered luxuries in the 19th century as well as goods that did not even exist then. For example, it is absurd that, under Marx’s subsistence wage equal to the value of labour-power, a worker would require a television, DVDs, mobile phones, and the host of other modern articles of consumption now enjoyed even by workers, for none of these things are actually needed for working people merely to live and reproduce themselves.

Nevertheless, if we look over the average monthly earnings data for German workers here, we can see that virtually all jobs provide an average monthly salary well above the modern poverty line. The average monthly salary in German manufacturing is €4,242 – a wage vastly above anything that could be described as subsistence level.

If we able to aggregate all human labour with a homogeneous unit of Marx’s abstract socially necessary labour time, and then set an appropriate wage rate for one simple hour of labour, it would follow from the data that most wages in modern capitalism are well above Marx’s value of labour-power, and it would be very likely that many workers suffer very little exploitation or no exploitation at all in Marx’s sense because they are paid not only for necessary labour-time but also surplus labour-time or most of surplus labour time too – for if they were not their wages would have been stagnating for over 100 years at subsistence levels.

Marx’s whole theory of exploitation is dependent on the idea that workers must tend to be paid a subsistence wage equal to the value of reproduction and maintenance of labour, but once we see that wages in capitalism have soared above subsistence level this is shown to be false, and the whole theory comes crashing down.

Another point is that for a self-employed worker who owns, runs and works alone in his own business, Marxist exploitation cannot arise. Even worse, Marx distinguished between so-called “productive” and “unproductive” labour and seems to have argued that vast sections of what we would now call the service economy do not add surplus value (e.g., see Capital, volume 3, Chapter 17), even though they manifestly do produce profits and account for a huge percentage of employment in modern capitalism. How is a person in a service industry who produces no surplus value being exploited in Marx’s theory? Of course, Marx would argue that surplus value from value-producing industries is redistributed, but, again, that only works if labour tends to be paid just for its value of reproduction and maintenance (that is, a subsistence wage), which, as we have seen, is generally just not true.

A final point is that once Marx’s idea that commodities tend to exchange at true labour value is overthrown (as in volume 3 of Capital), it follows that many commodities can sell for prices well above their labour values and businesses can afford a wage to workers well above subsistence level and even covering their surplus labour time, a state of affairs which would not even involve exploitation by extraction of unpaid surplus labour value.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1990. Capital. A Critique of Political Economy. Volume One (trans. Ben Fowkes). Penguin Books, London.

Friday, February 12, 2016

Would Capitalism necessarily be destroyed if Human Labour fell towards Zero?

In a word: no.

Why? Because an economy with more and more automation based on private enterprise and private capitalist production could still sell its output and obtain money profits, if a government managed the demand-side of the economy by providing a guaranteed income (with, say, taxes on consumption, property, and ownership of financial and real assets and returns from those assets, with the shortfall covered by central bank money creation). As long as the balance of payments functioned successfully, a type of capitalism could continue.

That is, such an economy would still be a variety or type of capitalism: it would not be a command economy or the type of socialism envisaged by Marx.

Any Marxist response to this depends on Marx’s definition of capitalism. If one wants to define capitalism merely as a system of private production based on employment of free human wage labourers, then of course capitalism would cease once employment of free human labour ceased.

But this is just playing with words: setting up a narrow analytic definition of capitalism (true by definition), and ignoring other obvious real world aspects of capitalist systems of production.

If capitalism is to be defined in any empirically-defensible sense, it would need to use the following criteria:
Capitalism is a system of production as follows:
(1) where the vast majority of all capital goods are owned privately and where there is a high degree of private property (in land, houses, private possessions, etc.) and rights to private property;

(2) where the vast majority of all decisions on investment and production of commodities are made by private agents (though this does not exclude certain public goods);

(3) where there exists a class of free human beings who work for a wage, either from the private or public sector (though mostly in the private sector).
Now if (3) fell and fell or even ceased to happen in an economy where production is increasingly done by machines, then it would still leave us with criteria (1) and (2).

The new system of nearly fully or fully automated production would in essence still be a type of capitalism, because it would still have traits (1) and (2), which clearly lie at the heart of what capitalism is.

In short, it would not be a system where all business is owned by the state or where the state plans all economic activity, and there is no necessary reason why a capitalist mode of production must end even if human wage labour falls towards zero.