Labor, Product, Value

S. Artesian

1. So let’s return to our make believe world where everything and the only thing that is produced is wheat.   Let’s ignore that human society couldn’t survive with such mono-production, not to mention capital couldn’t exist as capital if it were a mono-commodity.  There would be nothing to exchange; no reason for exchange.   But enough of that, we have a theory to explore, so……

Physiocrat Case A:  workers working for physiocrat MacDonald Sr. work 10 hours per day.  The workers produce 10 bushels of wheat in that ten hours.   The workers require 2 bushels of wheat each day to replenish themselves, body and spirit, and their families:

Product Big C case A = 10 bushels

Labor time = 10 hours

Necessary product = 2 bushels

Necessary labor time = 2 hours

Surplus product = 8 bushels

Surplus labor time = 8 hours

The product:time ratio is 1:1.   No matter how we express the value of the bushel in money terms, as a price, the value of each bushel is 1 hour.

Okay, so let’s express the value of an hour of production as four dollars.

Product Big C = 10 bushels = 10 hours = $40

Necessary labor = 2 bushels = 2 hours = $8

Surplus labor = 8 bushels = 8 hours = $32

Physiocrat case B:  workers working for physiocrat MacDonald Jr. work 10 hours per day.  Unlike MacDonald the elder, MacDonald the younger installs enhanced drainage, the expense of which is offset by the reduced seed and fertilizer applied to the better drained soil.   Workers still require 2 bushels of wheat to reproduce themselves and their families, but instead of producing 10 bushels for Old MacDonald, these workers produce 20 bushels of wheat.  Ten hours now equals 20 bushels in wheat-world.

Product Big C case B = 20 bushels

Labor time = 10 hours

Necessary product = 2 bushels

Necessary labor time = 1 hour

Surplus product = 18 bushels

Surplus labor time = 9 hours

The product:time ratio is 2:1.  Now the value of a bushel of wheat is 1/2 hour.

Again we express the value of an hour of production as four dollars.

Product Big C case B = $40

Necessary labor = 2 bushels = 1 hour = $4

Surplus labor =  18 bushels = 9 hours = $36

The total value has not changed.  The ten additional bushels of wheat do not change the value of the product of the working day.  Increased product is not automatically increased value as value is an expression of social, human, time and not an expression of the physical characteristics– volume, weight, number, of the product.

No new value is created despite the obvious and inescapable increase in use values.  All that has changed, in value terms is the allocation of the working day between the necessary time, the reduction in time required for the workers to reproduce the wheat wage, and the subsequent increase in the time aggrandized by Younger MacDonald.  The increase is confined to the surplus labor time, the surplus value, embodied in the product which is contingent upon, derived from, the reduced value of the wage.  This is a real reduction of the value of the wage, the time necessary for its reproduction.

And that’s all we need to know about the relations of productivity to relative surplus value in wheat-world.  Well… maybe there’s more to know, like, say the workers working for MacDonald the younger might actually band together and demand an increase in wages to 3 bushels of wheat, equal to 1.5 hours of necessary labor, leaving 8.5 hours of surplus labor equal to $34.

Good news for the workers?  Not hardly.  Notice the increase in the value of the wage is a function of  power.   The  power of the capitalist increases disproportionately with each incremental appropriation of surplus value in that the capitalist already possess the power of the mode of production itself.  The reduction of nominal value of the wage always becomes the reduction in its real value as the portion of total value aggrandized by capital increases. That is the power relationship that is inherent in the “economic,” social relation of wage-laborers to capitalists.  This is what happened in the long deflation, the period from 1873-1898 in the US, when the nominal wages in the US declined and violently so, and the decline was “offset” by the decline in real cost for housing, food, clothing.  This period was one of cyclical recessions followed by expansions, both phases accompanied by increasing self-organization of the workers, struggles against wage reductions, and struggles for limits to the working day.

2.  So much for make believe.  Lets move on to the real world where we can engage in speculation.  First, can we translate the dynamic of wheat-world to the real world, where capital can only exist to the extent that all production is commodity production, that all products are commodities, where the necessary labor in fact cannot be expressed as any single or collection of commodities, but is always expressed in and by itself as the wage capable of exchange for all commodities?  The answer has to be “yes.”  Value is blind to everything but itself,  precisely because it veils itself through its universe of equivalent exchanges:  wheat equals automobiles equals petroleum equals televisions equals shoes equal cellphones equal antibiotics, not only because all are values, but because value is all.

Nobody, after all, gets paid in petroleum, or antibiotics, or televisions, or cellphones, but all are paid in an equivalent, a portion of the value embodied in petroleum, or antibiotics, or televisions…….

What happens when productivity increases the production of these use values?

Increased physical output does not increase the total value. We know that. In value terms, the value in sum remains unchanged. But in price terms, each additional automobile, cellphone, each use value represents an increased claim, demand, entry for a portion of the total surplus value flushed into the market.   Price is the representation of value in money terms, and more than just the representation, it is a mechanism for the distribution of surplus value to the largest and most efficient capitals.

Marx recognizes this distributive property when he refers repeatedly to the lower prices, the lowering prices, of commodities as the battering ram by which capital knocks down the doors “protecting” non-capitalist economies.  He recognizes it further in his discussions of prices of production, and market prices.  Size does matter, and profits accrue to capital in proportion to their sizes.  Price, the price weight, that a capital can bring to bear on the market does matter, and productivity is the way that capital creates its universe of price points.

Let’s fashion a comparison based on the 2016 US Department of Commerce Annual Survey of Manufactures.

For US manufacturing as a whole:

A: Production worker wages per production hour (PPH), not including benefits:  $23.28

B: Total cost of material used in production PPH: $187.65

C: Total value of all shipments, receipts, etc PPH: $341.48

D: Total capital spending PPH: $10.73

E: Total all other expenses PPH: $13.40

Net value added (NVA) PPH =   C -(A+B+D+E) = $106.42

Ratio NVA/Production worker wage = Proxy S/V = 4.57:1

Proxy rate of profit  = NVA/ (B+D+A+E) =  .453

US Petroleum and Coal Manufacturing:

A: Production worker wages PPH: $41.58

B: Total cost of material used PPH: $2362.31

C: Total value PPH: $2925.08

D: Total cap spending PPH: $97.09

E: Total other expenses PPH: $52.83

NVA PPH  = $371.27

Proxy S/V = 8.93:1

Proxy ROP = .145

Now the different net value added per production hours between manufacturing and petroleum is an bit of an illusion, in that an hour is an hour is an hour, and the workers in the petroleum fields are not adding any more value in an hour than a worker in a food processing plant is adding in an hour.  But, the pricing mechanism, which distributes the total surplus value, distributes more to the petroleum industry, “compensating” the industry for its greater capital intensity.   When the price of oil shoots up, the distribution is intending to equalize rates of profit.  Productivity, reducing the unit cost, increasing the units, expanding the points of exchange is reducing the cost of production while the size of the capital allows for the increase in production prices.  Productivity is not increasing “relative surplus value,” but is transferring surplus value to the largest and most efficient capitals.  Value is enhanced, driven forward, by increases in the working hours aggrandized, not in the reduction of unit-times, until, of course, overproduction overtakes this entire process and paralyzes accumulation.

This price mechanism is the process through which capitals of a) equal size claim equal profits  b) the greatest intensity,  that is to say, a disproportion of the ratio of the constant, previously accumulated, portions of capital to the living capital exceed, and by a lot, the social average of that ratio can leverage that differential against the reduced costs of production to achieve an average rate of profit, offsetting the “disadvantage” engendered by the disproportion.  This can be done through lower prices, aggrandizing market share, and also by increased prices, as in the case of petroleum.  In this sense, the pricing process is purposeful.  Capitalists make these decisions on pricing, but they do not make them out of thin air, or simply based on cost.  Such decisions are made in, of, and often, “against” what would appear to be simple market prices.

The bottom line is always the bottom line.  And that’s profit, for capital.  Productivity does not ever flow directly to that bottom line for an individual capitalist enterprise, or for any specific capitalist sector, but is “flushed” to that bottom line through social process of exchange, through price.

The dilemma for and of relative surplus value is that regardless of how much is produced, in volume, value is determined by time.  Time rules as capital struggles within and against the curves of a universe of its making.  Relative surplus value does not exist independently of the distribution of the total surplus value extracted by big C Capital.

Surplus value is indeed relative in that it is always disappearing into the accumulation of capital through its very realization. It appears as an increment to while it vanishes as capital.


July 15, 2018

One thought on “Labor, Product, Value”

  1. It’s always hard to explain how profit arises under capitalism; I’ve read many examples like the one you use. Marx tried to explain, I believe, in Capital, how the capitalist can continue to extract value from the worker by showing that if the worker has a “contract” to provide his/her labor for 10 hours, that is no bar to being able to work for 12, and that extra 2 hours is obtained by the capitalist as profit.

    It seems to me that profit can be explained as follows without using to term “value.”

    Price (of a commodity) is = to the total price of the production cost of that commodity. The price of production is cost of labor + cost of non-labor + profit. The Bureau of Economic Analysis uses this terminology. This formula admits that the profit from the sale of the commodity is actually produced in the production of the commodity, rather than in a process occurring in the sale of the commodity. Also, bourgeois economists, are finally beginning to admit that profit can only arise during the production process. But if that is true then it can only mean that profit can never be found in the sale of the product, it is already in the product when it (whether a good or service) leaves the factory.

    It also means that the only source of the profit is that of the unpaid labor of the worker. So you have: Cost of Paid Labor (wages) + Non-Labor Costs (raw materials, loans, bank interest, etc.) + Non-Paid Labor (Profit, Added Value or Surplus Value) = Price.
    Simplified to this:
    Wages + Non-Labor Costs + Profit = Price. The only source possible for profit is the non-paid labor of the worker. It is true that price may fluctuate from time to time, but that makes no difference because the analysis treats price as the “natural” price of Adam Smith, not the variations in price over time.

    The only problem with this analysis is that there is no proof that the cost of production is equal to the total labor expended during the production. However, there is a United Nation (I believe the OECD) document which shows the average price of production of commodities PER WORKER.

    The US doesn’t have this kind of analysis because the government economists don’t believe the total value (price) of a commodity can be directly attributed to labor. However, the BEA produces a similar statistic in its GDP numbers. It is located in Table One (1) Line 15 (I believe) which is the source of my above formula: Labor Costs + Non-Labor Costs + Profit = Price.

    I don’t pretend to express my views that accurately, but I do believe that non-paid labor as the source of profit can be explained with modern economic data. And that explains the exploitation of capital.

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