Workers producing value in a textile factory (Pic: Public domain)
What makes something valuable? Karl Marx developed a distinct approach to answer this question—the “labour theory of value”.
He argued that capitalism is unique because it is based on generalised commodity production. Most things that are produced are produced to be sold.
These commodities must be useful in some way. This is called a “use value”. It isn’t just something to be eaten or worn, it can also be to read or to watch. As Marx wrote, the use might be of the stomach or the imagination.
For commodities to be exchanged, they must be compared to one another. So each commodity has an exchange value. This enables commodities to be bought and sold on a market.
A complex market requires something to operate as a “universal equivalent” between all the different commodities—and money plays that role.
Money can hide the fact that the one thing all commodities have in common is that labour went into creating them.
Value is not determined by the labour time involved in producing an individual commodity. A slow, incompetent producer cannot charge more than a fast, efficient producer.
Value depends on the amount of labour required by the typical worker using normal techniques and equipment. Marx called this “socially necessary labour time”.
Labour is in some ways a commodity like any other commodity. It has a use value and an exchange value, the wage.
But, unlike other commodities, workers have consciousness. They can organise and demand higher wages.
Crucially, Marx argued that we do not get paid for the hours we work. Rather, it is our labour power, our ability to work, that we exchange for a wage.
The value of labour power includes not only the cost of food, drink and shelter, but of holidays and leisure activities.
During the working day, we spend some hours producing enough value to cover the necessary labour time for our reproduction.
But the rest of the working day is spent producing surplus value. The worker is paid less than the value of what they produce—the difference is profit.
In a morning, a worker might produce enough value to cover their wages. The whole afternoon is then spent producing surplus value for the boss.
This is exploitation and it is driven by competition.
Competition pushes the bosses to maximise the exploitation that creates surplus value, or profit.
They must keep wages as low as possible. They have to maximise the length of the working day and make us work more intensely.
The bosses must also plough money back into developing new technologies to make their workforce more productive. If they don’t, they will go bust.
Over time, this leads to a massive increase in the technological means of producing commodities. But instead of improving our lives, this productivity drives the system into crisis.
To explain this, Marx distinguished between two forms of capital investment.
First, there is dead labour—the raw materials and machinery used in production. It was produced by the labour of the past.
Second, there is living labour—that’s us, the workers. Only living labour creates new, unpaid, value for the capitalist.
Each boss wants to be the first to introduce new technology. This makes commodities quicker and cheaper to produce. Others rush to catch up.
But what is rational for one boss is irrational when generalised across the whole system. This is because it is living labour, not dead labour in the form of technology, that creates value.
As living labour is squeezed out of the production process, the rate of profit begins to fall. Investment shrinks. Workers are thrown out of work. Machines stand idle. Homes are repossessed. Lives are destroyed.
Our labour has the potential to satisfy our needs and liberate us from tedious jobs. But we need to free that potential from the exploitation and devastating crises inherent in capitalism.
Even the most perfect meritocratic society would be unequal
A system that lasted for hundreds of years
Socialism is a broad term, but communism is something different
