Labour theory of Value and Surplus value

Labour theory of Value and surplus value As the market economy was developing and the barter system in which producers of different products exchanged their products according to their use, was being replaced by commodity based exchange of various products through middlemen, the relative quantities of various commodities being exchanged appeared to be through mutual consensus. But as the mercantile economy developed, it transpired that there must be some element commonly present in all the commodities, amounts of which determined the relative quantities of commodities in exchange. This element could not be utility or use-value as utility of different things was different. This element came to be known as ‘exchange value’ or simply ‘value’. No one knew what determined the value of a commodity and was generally thought to be determined by the balance between supply and demand. Here we can not go into the history how a fixed quantity of a precious metal, a commodity, assumed the role of the standard unit to measure the value of all other commodities, that is money. But one thing is obvious that value of any commodity is intangible and equal values can be exchanged only when they are manifested as something tangible either in the form of commodities as in barter, or any other thing whose value as a standard of exchange is acceptable to both the parties without any ambiguity. In the developed market economy, within the domain of a state, coins minted or paper currency printed by the state came to be accepted as money. since then value of every commodity is expressed in terms of money, and price expressed in terms of money has become synonymous to value. Because of this obfuscation people are unable to understand the real character of value and that how it is created and how profit is generated. In the initial stage of fully developed market economy in which mercantile capital controlled exchange of commodities, economists and philosophers were intrigued about the genesis of the element of ‘Value’. But with industrial revolution and mass scale production with wage-labour, it was becoming clear that wide varieties of commodities are being produced by same kind of uniform labour and thinkers started contemplating some relation between value and labour. Two important economists Adam Smith and David Ricardo postulated that value is a measure of the average uniform labour time spent in producing a commodity. While equating value to labour time, Adam Smith considered only the direct labour time spent, David Ricardo included the past labour also in terms of raw material and depreciation of means of labour. But they were unable to understand how profit is generated when in a fully developed market economy every commodity including wage-labour is sold at its value. The credit goes to Marx to reveal the true essence of value and surplus value. With his thorough understanding of Dialectics of Nature, he could conceive the dual nature of human labour power and also the dual nature of the product of labour, and also the Dialectical relationship between the ‘Labour Power’ and the ‘Labour’. Labour power is expanded to produce physical means of life, and consumption of physical means of life regenerates the labour power spent. And this dual relationship is not ‘cyclical’ but is ‘spiral’. With every cycle the productivity of labour power rises to a higher level. The human labour power is naturally endowed to be capable of producing more than what is needed to regenerate it. Or in other words it is capable of generating ‘Surplus-value’. By establishing his ‘Labour Theory of Value and Surplus-value’ Marx converted political-economy into a real science. In order to understand ‘value’, you have to keep in mind that human labour power and the useful outcome of that labour power spent, have dual characters. Firstly any useful labour can be seen as sum total of very small fractions of labour power expanded in very small fractions of time. In this aspect labour of different workers is same. Secondly, permutations and combinations of well arranged fractions of labour can produce different unique labour outcome to produce different commodities capable of satisfying different needs. Congealed labour is absorbed within the commodity and an observer can not perceive it by sense organs. The two aspects of labour can not be separated physically and any product of use presents itself only as an useful product. In barter system both parties see only utility of other’s product without so much as bothering about ‘value’. But when the barter system takes the form of exchange, the scenario changes and so does the outlook of the producer as a ‘seller’. He sees only a value in his product as he is not interested in using it but is interested in exchanging it for something of utility. But his buyer is not in a position to offer something of immediate use to the producer. Instead he is able to offer something which can be further exchanged by the producer for something useful and in this sense the producer tries to asses the ‘equivalent value’ of the commodity he is receiving in lieu of his product. Thus during exchange one person sees two different values in two different commodities. In one he sees ‘relative value’. In the other commodity he sees a value equivalent to the use value of the commodity which he can get in the market for the exchange of the commodity to be received. Or in one commodity two different persons, because of their different positions, see two different values, ‘relative vale’ in the form of uniform labour and ‘equivalent value’ in the form of special useful labour. If you are conversant with Dialectical relationship between being and consciousness than it should not be difficult to understand the difference between the mentality and motivation of the producer, of the consumer and of the middleman in relation to the exchange of a commodity. 1. When we talk of ‘Lagat Mulya’ we talk of the value (Labour power x Time) spent by the workman transforming natural resource into useable form i.e. in producing the commodity and he sells it in exchange of something whereby he could buy goods to replenish all that is necessary to reproduce and sell anew. He equates the use-value of all the goods he buys, to the value invested or ‘Lagat Mulya’. Use-value of goods needed to replace his labour-power remains same but relative-value of goods produced by him reduces or ‘Lagat Mulya’ decreases with experience as his productivity increases because of improved skill and instruments of labour. 2. The consumer buys a commodity in exchange of something which he owns, whether he has produced it or has acquired by any other means and assesses that the use-value of the commodity which he is going to buy is equivalent to the value of goods he is giving in exchange. 3. The middleman buys a commodity to sell it, and to sell in exchange with something of higher value than he paid for buying it. Otherwise he will not be interested in buying and selling of that commodity. To be able to sell, it is necessary that his buyer has a need for the commodity being sold and assesses its equivalent value same as the middle man expects to fetch. Or in other words the middleman must know in advance at what price he will be able to sell to the consumer. Thus the middle man buys a commodity at the relative-value as assessed by the producer, and sells it at equivalent value as assessed by the consumer. Thus a commodity reflects three different sets of ideas in the minds of three different persons depending upon their relative positions. The producer sees the relative-value on the basis of uniform labour time spent in producing the commodity. The consumer sees the equivalent-value on the basis of the labour-power to be regenerated with the consumption of the commodity, and the middleman sees the surplus-value or the difference between the equivalent-value being seen by the consumer and the the relative-value being seen by the producer. As the exchange is being done with the help of the money, we can equate value to price and we can analyse the transaction on the basis of purchase price and sale price to understand how the profit is generated while every commodity is being sold at its value. As explained above, the capitalist purchases labour-power of a worker at a price ‘X’, and makes the worker expand this labour-power to produce commodity of price ‘X+x’. He sells part of the commodity for a price ‘X’ to a consumer to regenerate his labour-power of price ‘X’ which he sells at price ‘X’ to the capitalist to reproduce ‘X+x’ anew. The surplus ‘x’ is pocketed by the capitalist as profit. This is a simple model to explain, but in fact in modern capitalist economy there are hundreds of workers, hundreds of consumers and hundreds of capitalists under the control of a single gargantuan capital. Suresh Srivastava 8 April, 2019