This is Capitalism

Capitalist society is based on exploitation is one in which one class, through its ownership of the means of production, is able to live as a parasite class, not producing, but living on the labour of—that is, exploiting—the other class, or classes, who are obliged to do all the real productive work on which the life of the society as a whole depends. But though all class societies are based on exploitation, the form of the exploitation, and therefore the character of the classes and of the societies themselves, differ. Capitalist exploitation is clearly understood by every worker. We know that while we and our fellow-workers do all the work, it is the small class of capitalists who enjoy the lion’s share of all that he produces. The nature of the exploitation, that is to say how we are exploited, is not however so obvious, because, unlike the slave or the serf from past epochs, the wage worker is not legally forced to work for a master. Yet in fact, like the serfs, we work part of the time for ourselves and part for the employer. Like the slave, what we produce is not ours but the employer’s, who owns the means of production.

In order that production may be carried on in capitalist society it is necessary that there should be, on the one hand, capitalists who have at their disposal sufficient resources to buy or rent factories, to purchase raw materials and to pay wages; and, on the other, workers who will be prepared to work for wages because they have no other means of livelihood. The capitalists then set the workers to work on their raw materials, in their factories; and therefore the goods which the workers produce also belong to the capitalists to dispose of as they wish. Since the goods produced are neither for the personal use of the capitalists to whom they belong, nor of the workers who make them, the capitalists must be able to find someone who will buy them, i.e., find a market for them. Such goods, that is to say goods produced for sale on the market, are known as commodities. Now though a commodity must be wanted by someone (must have use-value) or else nobody would buy it, the decision of the capitalist to produce a given commodity is not determined by the needs of the people, but by the expectation that he will find someone able to pay for it. If more profit can be made from selling television sets to the rich than by selling tables to the workers, more television sets than tables will be produced, however great the shortage of tables. In other words, the motive of capitalist production, the reason why capitalists decide to produce what they do, is not the needs of the people: but the search for profits.

Profit is the difference between the cost of production of a commodity and the price for which it sells on the market. It is sometimes argued, therefore, that it is the result of cheating, of selling commodities above their value. But, if this were so, the profit made by one capitalist would simply cancel out the loss made by another. We must therefore be able to explain profit on the assumption that commodities are bought and sold (are exchanged through the medium of money) at their value.

If commodities exchange at their value, there must be some property common to them all by which their values can be compared. It is not their “use value,” referred to above, or otherwise the necessities of life as would sell (that is exchange for) more than the luxuries. But there is another factor, and only one other, that is common to all commodities; and that is that they are produced by human labour. Thus the exchange value (or simply “the value”) of a commodity is determined by the amount of labour (i.e., the labour-time) that goes into its production. More accurately, it is determined by the “average socially necessary labour-time,” since the amount of labour-time required at any particular time for producing commodities of that sort will depend on the technical methods available at that time.

But since commodities exchange at their value, how does this explain profit? We can only answer this if we can find a commodity which actually creates value in the course of being used. This Marx was the first to do by discovering the difference between labour and labour-power.

When a capitalist employs a worker, he is not buying the worker’s labour. He could only buy that in the form of the finished article after the worker has made it. What he does buy is the worker’s ability to work, his or her labour power; and the value of this is determined like that of any other commodity, by the amount of average labour-time necessary to produce it. This means, in the case of labour-power, the time required to produce the food, clothes and other necessities that are needed, in a given country, at a given time, to keep the worker and his family alive and able to work. (The more skilled a worker is the more training required, and therefore the greater the value of his or her labour-power.) And it is this value which determines the general level of wages paid to the worker by the capitalist.

But, with the technical methods available in modern society, it only takes the worker part of the working day to create, and embody in what he or she is producing, the equivalent of his or her keep ( wages). In four hours, say, a workers creates sufficient value to pay the wages. But since what he or she has sold to the capitalist is labour-power, the ability to work for, say, eight hours, the surplus value created in this further four hours also belongs to the capitalist, though the capitalist pays nothing for it. It is out of this surplus value that the capitalist makes his profit; and, since it has not been paid for, it is clear that the capitalist is therefore exploiting the worker.

So far we have been considering how value is determined—the value of labour-power or of any other community. It must, however, be borne in mind that the actual price of commodities may in practice, and usually does, vary from the value at any time as a result of competition between the capitalists or of the working of supply and demand—the fact, that is to say, that there is sometimes an excess, sometimes a scarcity, of a given commodity on the market. In the same way, the price of labour-power (i.e., wages) will vary from its value as a result of trade union action.

It follows that the economic interests of the capitalists and those of the workers are diametrically opposed: for the more the capitalist can exploit the worker the greater will be his profit. This he can do in two ways. He can lengthen the working day, which means that, since the amount of labour-time necessary to create the value of the worker’s wages remains the same, the additional hours are devoted to creating more surplus value. This is called increasing absolute surplus value. Or, on the other hand, he can increase the relative surplus value, which is achieved in the following way: As improvements in technique increase the productivity of labour, less labour is required to produce the means of subsistence of the worker. As a result of this a smaller part of the working day is devoted to producing the value of the workers’ subsistence (of the wages, that is to say), and a larger part is available for creating surplus value. In both cases the exploitation of the worker is therefore increased.

Inevitably the workers resist these attempts of the capitalists by fighting for higher wages and shorter hours; and, since they soon discover that their individual efforts are ineffective, they organise themselves in trade unions for the purpose. This is the first form that the class struggle takes. But trade union action alone can only modify the exploitation of the workers, can only effect reforms within the capitalist system. 

Once, however, the workers begin to understand the real nature of capitalist exploitation—the fact that the capitalists are appropriating for themselves the unpaid labour of the workers—they see the necessity for political action; that is to say, for putting an end to the capitalist system and building socialism in its place.