But how were people to determine the value ratio at which different products would exchange? Marx explained that this was done on the basis of their one common denominator - the amount of labour time that went into producing a particular article. This exchange value does not necessarily correlate to the original use value (i.e. the utility it possesses for human beings) - for instance, diamonds are of very little practical use, but still, realise a high exchange value since their extraction is a time-consuming and labour intensive business. Likewise, many things which have a high use value to human beings (such as air) do not command any exchange value. Exchange value is determined not at an individual level but in terms of socially necessary labour time; that is the average time across the whole of that economic sector and factoring in the existing level of technology and specialisation. Thus just because one worker takes 30 minutes to produce a watch which normally takes 10 minutes to manufacture does not mean that that watch will be able to realise 3 times the exchange value. Rather the watch-maker would have to work three times as long to produce enough goods to exchange for the same amount of other products. It is important to stress here that when Marx talked about the value of goods being determined by labour time this was not the same thing as price since prices are in a constant state of disequilibrium and fluctuate constantly above or below actual value.
Now as we know very early on in human history our societies evolved from being mere aggregations of free independent producers to class societies in which existed on the one hand a large majority of un-free or semi-free labour and on the other a small elite which produced nothing at all but reserved for themselves the task of ruling over the others. But how could they support themselves without labour? The answer of course was that they would forcibly expropriate the surplus labour of others. That is to say, all of the value created over and above that needed to meet the subsistence needs of the slave or peasant farmer would accrue to the slave-owner or feudal lord. This exploitation was transparent and obvious, which is why it could only be justified by recourse to some sort of claim of divine providence or simple brute force. The genius of capitalism was that in place of this overt exploitation it was able to introduce a far subtler, more form. In an apparently free and equal exchange the capitalist who owned the means of production would advance to the worker wages in return for gaining control over the workers’ labour power. Since all commodities exchange at a value which corresponds to the socially necessary labour time necessary to reproduce them and here the commodity being exchanged is none other than labour itself. Therefore the wages paid will go to meet the upkeep of the individual worker, as well as his family which ensures the continued survival of the labour supply. However unlike all other commodities (such as raw materials, plant machinery etc) labour is unique in that it is capable not only of imparting a portion of its own cost of reproduction into a finished product but of also creating new value. Over time tools or machinery will use up their accumulated reproductive value in the production process and have to be replaced, but not so labour. Thus a worker may work 8 hours a day but in 5 hours produce enough value to meet his or her subsistence needs. This means that the value produced in the other 3 hours is surplus value, and since the worker is remunerated only for the cost of reproducing his or her labour - not the full value of the goods or services which their labour creates - it will accrue to the capitalist as profit. Another way of thinking about it is to say that since all commodities exchange on the basis of the labour time that went into their production (including that needed to extract raw materials and build machinery, not just in their final manufacture) and yet the worker does not receive the full value of the commodity, clearly exploitation exists.
However, by treating labour as a just another commodity going into the production process alongside raw materials, tools and plant machinery the capitalist system conceals this exploitation in a process which Marx calls “commodity fetishism”. From this people derive the idea that the capitalist him or herself actually creates value too since they supply the materials and means of production, when in fact without the introduction of labour these commodities are unable to do more than conserve their existing value. The relations of exploitation which were readily apparent under feudalism - where the peasant worked so many days of the year on his own land to feed and provide for his own family, and the remainder on the lands of the local baron the proceeds of which went to maintain the feudal lord - are under capitalism completely obscured. Under capitalism - unlike feudalism or other forms of pre-capitalist society - commodities are converted into money form only in order to then be exchanged for other commodities. However, in the current epoch this entire process is stood on its head so that money or capital now is converted into commodities (means of production, raw materials etc) only in order to generate a larger amount of capital. If it did not require the crucial addition of labour power in order to create new value, but could simply increase its own value spontaneously then there would be no need for it to engage in the sphere of production at all. Clearly, though this is not the case. This is significant particularly when thinking about all of the current hype about the new “pure” form of financial capitalism, in which money supposedly breeds money without any reference to the real physical economy.
Capitalism, more than any previous form of economic organisation, is a dynamic system whose fundamental laws of motion are competition and an inherent drive towards expansion. Since all production is subordinated to the need to accumulate more capital, individual capitalists must always strive to increase the level of surplus value they extract from their workers as well as to sell more and more commodities. An increase in surplus value can take place in one of two main ways: firstly through the increase in the duration of the working day (absolute surplus value), or secondly through an increase in productivity through increased levels of mechanisation, speed-up or a more specialised division of labour (relative surplus value). The first method (increase in the working day) is generally typical of capitalist development in a period of low technological development, such as Britain in the nineteenth century. It gradually lost its appeal as larger capitalist firms which could afford greater outlay of fixed or constant capital in plant machinery etc realised greater productivity from their workers, making each individual product or commodity cheaper to produce and in turn lowering the amount of socially necessary labour time to produce a specific commodity as determined across the whole economy. The smaller capitalists who relied on more traditional methods of surplus value extraction were as a result driven from the marketplace.
The irrationality of a system which is constantly overcome by crises of overaccumulation while having an innate inability to fully utilise productive capacity has never been clearer than it is today. That is why now more than ever it is imperative to arm ourselves with a coherent and powerful critique of capitalism such as only Marxism can provide.