Knowledge is Power

Labour theory of value 

Socialism may be divided into three parts.

In the beginning is the Materialist Conception of History, which examines man’s social development and relates it to his power of wealth production. In this perspective, history is the process of struggle between classes for social and economic dominance.

In the end is the recognition of the class struggle under the present capitalist social system. Modern society is divided into workers and capitalists, who are in dispute over the division of wealth. When the subject working class take conscious political action to overthrow the capitalists' dominance, society will evolve into its next and higher stage—Socialism.

These two ends are linked by the Marxist analysis of capitalism. This analysis probes to the economic root of the system uncovers the course of capitalism's sustenance and expands into its outermost branches. The basis of Marx's examination of capitalism is the Labour Theory of Value.

 Karl Marx opened his great work Capital with the statement:

  "The wealth of those societies in which the capitalist mode of production prevails, presents itself as "an immense accumulation of commodities ” . 

What, then, is a commodity? It is not simply something which has physical properties. It is also something which has social properties, something which exists and operates under certain social conditions. Commodities in the mass are peculiar to capitalism and therefore typify that social system.

To understand capitalism, then, we must understand the commodity. To do this we must first isolate the commodity from its social sophistication so that it can be seen in its pure form. Only when we have thus examined it can we introduce the complications of its real existence.

A commodity is an article—a loaf of bread, a pair of shoes, or a service—a haircut, technical knowledge, which has use value. That is, it is useful to human beings because it satisfies some need or some fancy. A commodity must be able to be constantly reproduced in social production, as are the goods which come out of modern factories. It is produced, not for the individual consumption of the person who worked on it, but for sale on a market at a profit.

Selling a commodity is, in fact, exchanging it for another, with money intervening as a convenient method of carrying through the exchange. When commodities exchange they do so in a certain regulated proportion. If at a certain time a ton of coal may exchange for half a hundred-weight of tea, something must explain why the coal does not equal more or less tea. What is it that regulates the proportion in which commodities exchange with each other?

The only way in which commodities can be compared is through something which they have in common. This means that a commodity's physical properties, which are obviously dissimilar from that of other commodities, must be disregarded. Coal has nothing physically in common with tea, or butter, or any of the other things with which it exchanges.

There is only one thing which all commodities have in common. They are all produced by the application of human labour to some available material. Human labour, then, is the common property of all commodities and this, measured in time, is what must determine the proportion in which commodities exchange with each other.

But the labour time taken up in producing a commodity varies with the occasion and the condition of its production. With coal, for instance, it varies with the abundance of the seam which is being worked and with the degree of mechanisation involved. Thus the exchange value of a commodity is fixed by the amount of labour time which is socially necessary to produce it, under average conditions and intensity of work, at the time and place at which it is wanted.

This value regulates the rate at which commodities exchange with each other. It fixes the line above and below which a commodity’s price, under the pressures of market forces, may vary.

This conclusion applies to the commodity which we are all born with, but which emerges as a commodity only under the necessary social conditions—labour power. When our employers engage us, they are buying our labour-power at the price of our wage. This wage, just like any other price, can fluctuate. But the fluctuations are regulated to the value of the labour power.

Now what is the value of labour power? It is the amount of socially necessary labour involved in producing it—the labour in the houses, clothes, food, entertainments, and so forth, which contribute to the re-energising and reproduction of our ability to work. This value can be varied by a number of influences—among them the workers’ struggles in their Trade Unions.

So far so good. But if all commodities, including labour power, exchange generally at their value, how does profit arise? The answer to this question is found in the peculiar nature of labour power.

Employment is the process of synthesising part of the value of a number of commodities—of raw materials, of machines, of part finished products, and so on. At the end of this process, the finished product has a value greater than that of all the commodities embodied in it. It is labour power which, in the acts of its application, has done this—it has created value.

This is how it comes about that a capitalist buys his materials, his buildings, his machines and the workers’ labour power, all, on average, at their value. When these are all joined by human labour the result is a commodity of a value greater than the sum of all the commodities originally put into it.

It is from this surplus value, from the exploitation of human labour, that the capitalist gets his profit out of which he pays dividends, rent, interest on loans, taxes for the upkeep of the State, and so on.

This exploitation is the mainspring of capitalism; by understanding it we also understand the mechanisms of the system. We understand why capitalism works as it does, why it produces the problems that it does and why it must end as it will. The practice of modern capitalism in concentrating upon reducing the time spent in producing articles in order to sell cheaper, is a tribute to the truth of the labour theory of value. 

It is this understanding what makes the Socialist Party a distinctive organisation, marked by its exclusive ability to understand capitalism and to work for the next and higher stage in mankind's social advance.