Marx’s labour theory of value and exploitation under capitalism

The Cambridge economist Joan Robinson famously said that “the only thing worse than being exploited under capitalism is not being exploited under capitalism.” By this she meant that exploitation was something to be deplored, but that it made possible the material advance of humanity that has taken place under the capitalist system.

Karl Marx, with his labour theory of value, argues that under capitalism, all value is produced by labour, which is forced by the class of capitalists to work longer than is necessary to provide for their subsistence and, over time, for their ‘customary’ standard of life as the economy grows and wages rise. The capitalist exploits the labouring class by appropriating the surplus value produced by labour, which is the value or output in excess of the value of their wages. Surplus value is distributed as profits, interest and rent, and profits can be reinvested in expanding production and in this way lead to economic growth. Marx argues that his scientific analysis of capitalism shows that exploitation is inevitable under the system and that only by transcending it and moving to socialism can exploitation be overcome. Thus not only is this theory claimed to be scientific, but it is also political and ideological.

But does the claim that exploitation is inevitable under capitalism show that labour is the only source of value? It may be true that without the labouring class, production would not be possible. They could all go on strike, and production would come to an end until the strike had finished. But without the capitalist, who organises the production process and brings together capital goods, in some cases raw materials, and labour in a workplace, production would be equally impossible. Marx argues that only labour is productive, but I would argue that capital is also essential to production, so that the application of science and technology can be said to be productive. Capital may well exploit labour, but Marx has turned something political into what he claims is scientific.

In her ‘An Essay on Marxian Economics’, Joan Robinson makes the above point by drawing attention to Marx’s ‘scientific’ formula, his definition of the rate of exploitation, s/v, where s is surplus value and v is the value of wages paid to labour, what he calls ‘variable capital’. Robinson suggests that this definition, s/v, is political and could equally be s/(s+v), which would add surplus value to the denominator and show that capital and labour can both be seen to contribute to the production of surplus value which allows capitalism to expand and grow.

Exploitation certainly exists under capitalism and it remains as a social and political problem which we should aim to mitigate through public policy. This is the case even if we admit that capital as well as labour contributes to the production of value, and the two are seen to be dependant on each other in production. This does rather undermine the case for socialism if the latter was seen to be the way that labour can appropriate everything that it produces, rather than have capital ‘steal’ it. Despite this, much of Marx’s analysis of capitalism in his work Capital remains important as well as useful. The attempts at socialism in the former Soviet Union arguably failed to remove exploitation and oppression from society and created it in new forms, while socialists will continue to argue that we can do better than capitalism, but it remains the case that the surplus value and profits generated under capitalism, warts and all, are a mostly successful way of improving the material conditions of much of society.

 

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2 thoughts on “Marx’s labour theory of value and exploitation under capitalism

  1. First of all, Joan Robinson was also a socialist. Second of all, a capitalist (a mere shareholder) doesn’t organize production per se. He hires/elects directors (members of the board, who are often also shareholder/capitalists themselves, and by nature an extension of the capitalist class) to supervise that process, with the objective of achieving profit. But for an economy to develop, you need not have capitalists (who often care only about short term profits and know little about the enterprise they possess/inherit) selecting the board. Instead, you can have the professionals inside the firm (the technicians, managers, engineers, etc.), who are directly affected by the decisions, who are interested in the sucess of the project and know its workings, being the owners of the firm and democratic electorate of the board. That is the case of Mondragon. That is Socialism – to each according to his/her contribution, which is logically achieved through social ownership (cooperatives).
    The Soviet Union had nothing to do with it. It isn’t about state vs market, but about class, about relations of production. You can defend no state at all and still be a socialist (although not a very realist and pragmatic one, in the same sense that anarco-capitalists are not the most reasonable ideologues) in the same way you can defend massive state intervention within capitalism. Within feudalism there were kings and nobleman who advocated and put into practice social reforms which benefited the majority (but who remained serfs), same as social democrats in the post-war decades within capitalism. Same in slavery. I strongly recommend the work of Peter Turchin, who shows this has happened in cycles throughout history. Would you have accepted those reforms then as sufficient or would you have fought for the end of slavery and serfdom?
    Again, totalitarianism by bureucrats isn’t socialism – for a better notion of it I suggest David Schewickart’s “After Capitalism”, Gar Alperovitz’s “What then must we do?”, Richard Wolff’s “Democracy at Work” or David Ellerman’s “Democratic Firm”.
    I truly like your blog and your defense of a truly scientific economics/human biology, which must come from heterodox schools such as classic political economy and complexity, ecological, evolutionary and behavioral economics. But your political judgement seems to be lacking due to a degree of prejudice or lack of conceptual clarity.
    Hope this is helpful.

    • Thanks so much for you lengthy and interesting comment, as well as your kind words about my blog. I will have a look at some of the references you cite. Politically, I am probably closest to social democracy, seeking reforms to capitalism, rather than a revolution leading to socialism. It may be that some of my thoughts are not quite worked out as you say.

      I do like to try and take a step back when thinking about economics and politics and try to remind myself that today’s rich countries took a long time to evolve into capitalist democracies. While I think the latter kind of society is desirable, along with sometimes contested aspects such as social justice and low corruption, I recognize that such institutions and social outcomes cannot simply be transplanted into the poorest countries and be successful and have a basis in material development. So I remain interested in development, and do want to post more on it in this blog in the future, as it was what I studied latterly. But I do get distracted by current affairs in economics and it often seems good to post on those sorts of issues.

      Thanks again.

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