Karl Marx Surplus Value and Exploitation

Karl Marx Surplus Value, Karl Marx and Exploitation, Marxism Exploitation

Marx used the labor theory of value primarily as a tool to develop the concepts of surplus and exploitation. The mathematics and technicalities of that labor theory of value will not concern us here. Our concern is with Marx's broad conceptualization of production as being divided into two parts: the cost of production, which was the labor time spent on producing the good, and the surplus value, which was the difference between the good's price and its cost of production.

Marx's discussion of value contains an objective part that puts certain aspects of the economy into perspective, but it also explicitly includes an element of ideology. Stripped of ideological overtones, Marx's message is simply that any economy will produce more goods and services than are needed to pay all the real social costs of production. Thus, subtracting from total yearly output in the United States all the real costs that must be paid to produce that output would yield a residual, which could be called surplus value. These real costs would include both labor costs and capital costs. Marx's surplus value is thus similar to the physiocrats' concept of net product. How surpluses are divided up is a complicated question that involves issues of philosophy and legal structure. At the time that Marx wrote, these issues were very much on people's minds. The Industrial Revolution had brought about large increases in the yearly surplus value created in the world. Marx raised a legitimate question: What is an equitable way to distribute this socially produced surplus among participants in the society?

But Marx was not content merely to raise this issue. Nor was he content to suggest that in his time the cutting of the social pie was inequitable, unjust, and unfair. Marx went beyond this and claimed with "scientific objectivity" that the surplus created by labor was taken from it because of its lack of ownership of the means of production. It is this claim of scientific objectivity that has not stood the test of time and that has led to the careful reexamination of Marx's theory of value. Economists today, Marxist or mainstream, do not see economic theory as proving the existence or the nonexistence of exploitation.

Most modern economists have given up the labor theory of value, but the concepts of surplus and exploitation are still used often in discussions and in the popular press. For example, workers in developing countries are often described as being exploited by global companies because they are paid lower wages than U.S. workers. Similarly, large profits are considered a surplus that is taken from workers.

There are legitimate questions in economics about the equitable distribution of income, and viewing aspects of income as a surplus may be useful in answering these questions. We are less clear about whether the concept of exploitation is useful. To call something "exploitation" requires a set of judgments that go far beyond economics, and what may be exploitation in one economy may be a good job in another. Most workers in developing countries feel they are better off working for a global corporation than they would be if the global corporation were not there providing jobs for them.

Marx used the terms surplus and exploitation in a pejorative sense. He strongly believed that the income distribution at the time was unfair and that the institutions that led to this unfairness deserved to be called exploitative. Most modern economists see such judgments as going beyond the role of economists as economists. They try to separate normative judgments from positive analysis. But even in terms of normative judgments, they question the value of the exploitation concept. They see human nature as generally exploitative and see the market as based on the concept of mutual exploitation. Abba Lerner summarized this view nicely: in capitalism man exploits man; in socialism It is the other way around.