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If you want to keep a blog that makes the arguments every day against the ravages of capitalism going and keeps alive the flame of democracy and community, make a donation to help cover my costs. And of course keep reading the blog. To donate click here. Keep socialist blog En Passant going. More... (4)

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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. http://sharonfirebrace.files.wordpress.com/2014/02/18-2-14-john-passant-aust-national-university-g20-meeting-age-of-enttilement-engineers-attack-of-austerity-hardship-on-civilians.mp3 (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. http://sharonfirebrace.com/2014/02/11/john-passant-aust-national-university-canberra-2/ (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. http://sharonfirebrace.files.wordpress.com/2014/02/4-2-14-john-passant-aust-national-university-canberra-end-of-the-age-of-entitlement-for-the-needy-but-pandering-to-the-lusts-of-the-greedy.mp3 (0)

Time for a House Un-Australian Activities Committee?
Tony Abbott thinks the Australian Broadcasting Corporation is Un-Australian. I am looking forward to his government setting up the House Un-Australian Activities Committee. (1)

Make Gina Rinehart work for her dole
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Sick kids and paying upfront

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Save Medicare

Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
Me interviewed by Sharon Firebrace this morning for Razor Sharp. It happens every Tuesday. http://sharonfirebrace.com/2013/12/03/john-passant-australian-national-university-8/ (0)

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Who produces the wealth in society?

The late British socialist Duncan Hallas introduces Karl Marx’s labor theory of value in Socialist Worker.

THE BRITISH author and socialist George Bernard Shaw once wrote, “I don’t need a theory of value to tell me the poor are exploited.” He thought that Marxist economic theory was an unnecessary piece of armchair philosophizing.

This is a common point of view and often connected with the idea that Marxist economics is boring and hard to understand. Actually, the key ideas are easy enough to grasp–once you know what they’re intended for. Every theory has a purpose.

Marx’s purpose in analyzing capitalism was, first, to show how working people were exploited, and second, to uncover what he called the “economic law of motion” of the system. The first point becomes clear when you consider other system of exploitation that existed in the past.

Under the old feudal system in Europe, serfs worked part of the time on their own plots of land and part of the time on their lord’s land. The serfs weren’t paid for the extra work, so it was obvious that part of the fruits of their labor was going to the lord. They were exploited.

Modern workers, on the other hand, don’t seem to have to put in extra work time each week without pay. So how are workers exploited under capitalism in the scientific sense of the term–of having to work for nothing for the benefit of an exploiting class?

Karl Marx’s labor theory of value explains how.

– – – – – – – – – – – – – – – –

FIRST OF all, capitalism is a system of commodity production. This means simply that goods are produced for sale. So, what decides the relative prices of, say, a television and a car?

Clearly, it has something to do with the fact that it costs more to make a care than it does to make a television. But why does it cost more?

Marx’s answer is that “the value of a commodity is determined by the quantity of socially necessary labor time required for its production.” To put it crudely, a car costs more because more work has to be put in to make it.

This idea didn’t originate with Marx. As one modern economist put it:

The labor theory of value is one of the most powerful truisms in classical economics…and it apparently would have been still current–with refinements, to be sure –among orthodox economists if Marx and some of his forerunners had not put it to such effective use as the touchstone of working-class ideology.

Of course, the cost of the materials that go into making the car is greater than the cost of materials that go into the television. But these materials are also commodities, and their value is determined in the same way–by how much labor went into producing them.

The value of the end product is determined by the total amount of time needed, on average, for the whole process of producing it–and everything that went into it, including transportation costs and so on.

What does this have to do with exploitation?

Capitalists make money by selling commodities at prices that, at first glance, appear to be close to their values as determined by the amount of labor that went into them. Workers don’t have material commodities to sell. They do have something to sell, though–their ability to work, or their labor power.

Wages are the price of labor power, and since labor power is also a commodity, bought and sold like any other, it has its value. “The value of labor power,” Marx wrote, “is determined by the value of the necessaries required to produce, develop, maintain and perpetuate the laborer.”

But the value of labor power isn’t connected at all to the value of the goods produced by that labor power. The difference between the value of the commodities produced and the value of the labor power used in their production is what Marx called “surplus value.”

And in systems where workers are highly productive, the difference is very large.

The surplus value belongs to the bosses. It is the source of their profits. In other words, after employers pay for raw materials, semi-finished goods, wages and other expenses, they receive an income–which is made up of the unpaid labor of workers.

This is why socialists say that capitalism is a system built on organized theft.

First published in the March 17, 2000, issue of Socialist Worker, and republished there on 6 January 2012.

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Comments

Comment from Public Enemy Number 1
Time January 8, 2012 at 9:43 am

Thanks for posting this, very useful.

Comment from Ross
Time January 8, 2012 at 9:15 pm

To be fair John the “bosses” provide an organisation and direction for workers to be productive.Your view is just too simplistic.The real culprets of theft are the banksters who create from nothing all the new money for our Govts and businesses to function.This is the real source of oppression.

Since the beginning of the US Federal Reserve in 1913 they’ve acquired oil companies, arms manufacturers,drug companies,media companies and thus now control our Govts.They almost have absolute power.

Comment from spog
Time January 9, 2012 at 3:35 pm

Are you sure this isn’t a spoof site? If I was someone from the right who set out to lampoon the views of the left I reckon I couldn’t do much better than this.

Labour theory of value might be captivating, but is bollocks nonetheless. The value of something is what a person who wants the thing places on it. There is no inherent value whether from labour or capital.

Basing a theory on the notion that there is some kind of inherent embedded value is like using religion to justify any old cobblers.

Comment from John
Time January 9, 2012 at 10:09 pm

Yes I am sure it isn’t a spoof site. Your criticisms are hardly new, or convincing.