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The Marxist concept of Surplus Value

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The Marxist concept of surplus value is based on Karl Marx’s examination of the role of human labour in the production and circulation of commodities in society.
Volume 1 of Marx’s monumental work, Capital, first published in 1867, sets out the precise detail of the production of surplus-value as the source of capitalist profits. In any brief summary of the process, there needs to be some simple definitions and understanding of the terminology Marx used.
Commodity production
Commodities are goods produced solely for sale in the market place. If there is no market for the goods, or the market shrinks or disappears or is glutted, production is cut back or ceased altogether. In historically earlier periods of human production, goods were produced mainly for direct individual or social consumption, rather than for sale.
For a product to be successfully sold at market, Marx determined that it possess two criteria, two values; a use-value and an exchange-value.
The use-value of a product is the fact that it satisfies some human need such as the basic needs of food, shelter and clothing, or other needs such as long-distance telecommunications, public transport systems, sunscreen and any number of things. Use-value is not confined to products of human labour. The natural environment also provides many items for human use, such as rainfall, plants and animals, fish in the oceans, and so on.
Should any of the products become broken, worn out, consumed, rotten or obsolete, their use-value diminishes or vanishes altogether. Without use-value, a product cannot be sold in the market.
Exchange –value
The exchange-value of a product is the ratio in which it can be swapped for other use-value products. Marx showed that this ratio is determined by the amount of “socially-necessary” labour time incorporated in the production of each product. By “socially-necessary” labour time, Marx meant a production process using the average level of skill and intensity of work in the average workplace of a particular society, rather than the fastest or slowest, the most technically advanced or the most backward.
As commodity production replaced the ancient system of bartering goods, a universal exchange-value emerged in the form of money, which was more convenient and represented the value of goods as a price. Marx noted that price is only ever approximate to the real value of a commodity. Fluctuations around the value are influenced by the laws of supply and demand and the general unplanned nature of production.
Commodity circulation
Marx represented simple commodity production by the formula C – M – C, commodity – money – commodity. At this point money only serves to facilitate the circulation of commodities in society through buying and selling. There is no profit generated through this process, as the intrinsic value of one commodity is exchanged for one of equal value.
Marx looked closely at this process and was able to show that the circulation of commodities changes under the conditions of capitalist production. In this case, the formula becomes M – C – M, where the start and end point is money and the actual commodities are only produced for the purpose of generating money. Furthermore, he showed that the capitalists do not go to all this trouble merely to end up with what they started off with. A more accurate version of the formula is M – C – M1 where M1 represents a larger amount of money (capital) than was originally invested, i.e. a profit is realised when the commodity is eventually sold.   
What is the source of this profit? What happens during the process of commodity production that generates a profit for the owner of investment capital?
Labour power
Like any other commodity in the market, human labour power has its own value. This is calculated by the necessary labour time for the maintenance of each worker, that is, for food, clothing and shelter. Thus, the value of labour power is equal to the value of all those commodities which the average worker must consume to maintain themselves and their family, to ensure ongoing and future labour power for the capitalist class. This value is paid for by the capitalist in the form of wages.
Unlike other commodities and materials consumed in the process of production, labour power has the unique characteristic of adding value in the process of its consumption. This is because human beings, through their physical efforts, can transform what nature provides into things that have more use value.
Surplus labour produces surplus value
After several hours work, under average conditions, the worker may be close to adding sufficient value to the production process to repay the capitalist for the wages received. But workers cannot just knock off and go home when this point is reached. Generally they are hired for a set number of hours. (It used to be 8!) They are expected to keep on working and adding value to the production process until the allotted hours are up.
The finished product is appropriated by the capitalist and sent to market. When it is eventually sold, its exchange value (price) reflects the cost of raw materials and their processing, plus the labour power added and paid for by the capitalist as wages, plus the additional labour power (Marx called it surplus labour) that is unpaid. 
It is this surplus labour and the surplus value that it produces that is the real source of capitalist profit – the hidden exploitation of workers who spend a portion of their working day performing unpaid labour.
Class struggle
The capitalist mode of production gives rise to a constant struggle between the interests of the capitalist class who want to maximise their profits by extending the length of the working day and speeding up the pace of work to increase the unpaid period of labour, and the working class who struggle to resist and roll back the new level of exploitation.
The current battle against the IR laws highlights this conflict of interests, but adds two more features.
Firstly, the attack on workers and their wages and conditions is led by the section of the capitalists most closely connected with foreign imperialism. Their agenda is orchestrated through the Business Council of Australia and fits in neatly with the sell-out deal already stitched up through the US Free Trade Agreement. The idea is not only to screw down the Australian workers, but also to weaken and divide the local capitalists in preparation for further penetration and takeover of Australian industries.
Secondly, the new IR laws directly attack the rights of workers to organise and operate effective trade unions. These laws are similar, and in some cases worse, than those already operating in the USA, the home base of globalisation/imperialism. In the new globalised economy, repression must also be globalised.
Therefore, the class struggle increasingly takes on the character of struggle against imperialism, the dominant and driving force of capitalism in Australia.


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