NationMaster - Encyclopedia: Surplus value

Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving as a basis for capital accumulation. Marxism takes its name from the praxis (the synthesis of philosophy and political action) of Karl Marx and Friedrich Engels. ... Image File history File links Karl_Marx. ... This article or section does not cite any references or sources. ... Das Kapital (Capital, in the English translation) is an extensive treatise on political economy written by Karl Marx in German. ... Marxs theory of alienation (Entfremdung in German), as expressed in the writings of young Karl Marx, refers to the separation of things that naturally belong together, or to antagonism between things that are properly in harmony. ... This article or section does not cite any references or sources. ... Class consciousness is a category of Marxist theory, referring to the self-awareness of a social class, its capacity to act in its own rational interests, or measuring the extent to which an individual is conscious of the historical tasks their class (or class allegiance) sets for them. ... In Marxist theory, commodity fetishism is an inauthentic state of social relations, said to arise in complex capitalist market systems, where social relationships are confused with their medium, the commodity. ... Communism is an ideology that seeks to establish a classless, stateless social organization based on common ownership of the means of production. ... Cultural hegemony is a concept coined by Marxist philosopher Antonio Gramsci. ... The rate of exploitation is a concept in Marxian political economy. ... Marxs theory of human nature occupies an important place in his critique of capitalism, his conception of communism, and his materialist conception of history. Marx has sometimes been held to deny the existence of any human nature, though this view is now generally accepted to be mistaken. ... Political Ideologies Part of the Politics series Politics Portal This box: An ideology is an organized collection of ideas. ... The proletariat (from Latin proles, offspring) is a term used to identify a lower social class; a member of such a class is proletarian. ... Reification (German: Verdinglichung, literally: ver-, over + ding: thing + -lichung: as english, -ify) is the consideration of an abstraction or an object as if it had human or living existence and abilities; at the same time it implies the thingification of social relations. ... Relations of production (German: Produktionsverhaltnisse) is a concept frequently used by Karl Marx in his theory of historical materialism and in Das Kapital. ... Socialism refers to a broad array of doctrines or political movements that envisage a socio-economic system in which property and the distribution of wealth are subject to control by the community. ... Note: Marxian is not restricted to Marxian economics, as it includes those inspired by Marxs works who do not identify with Marxism as a political ideology. ... Labor power (in German: Arbeitskraft, or labor force) is a crucial concept used by Karl Marx in his critique of political economy. ... The law of value is a concept in Karl Marxs critique of political economy. ... Means of production (abbreviated MoP; German: Produktionsmittel), also called means of labour are the materials, tools and other instruments used by workers to make products. ... In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production (in German: Produktionsweise, meaning the way of producing) is a specific combination of: productive forces: these include human labor-power, tools, equipment, buildings and technologies, materials, and improved land social and technical relations... For the specific theoretical justifications behind the Great Leap Forward and the Five Year Plans, see Theory of Productive Forces. ... Surplus labour is a concept used by Karl Marx in his critique of political economy. ... In Karl Marxs economics the transformation problem is the problem of finding a general rule to transform the values of commodities (based on labour according to his labour theory of value) into the competitive prices of the marketplace. ... Wage labour is the socioeconomic relationship between a worker and an employer in which the worker sells their labour under a contract (employment), and the employer buys it, often in a labour market. ... Even though anarchist communism and Marxism are two very different political philosophies, there is some similarity between the methodology and ideology of some anarchists and some Marxists, and the history of the two have often been intertwined. ... The capitalist mode of production is a concept in Karl Marxâ€™s critique of political economy. ... Class struggle is class conflict looked at from a Marxist, libertarian socialist, or anarchist perspective. ... The dictatorship of the proletariat is a term employed by Karl Marx in his 1875 Critique of the Gotha Program that refers to a transition period between capitalist and communist society in which the state can be nothing but the revolutionary dictatorship of the proletariat. The term refers to a... Primitive accumulation of capital is a concept introduced by Karl Marx in part 8 of the first volume of Das Kapital (in German: ursprungliche Akkumulation, literally original accumulation or primeval accumulation). Its purpose is to help explain how the capitalist mode of production can come into being. ... A communist revolution is a social revolution inspired by the ideas of Marxism that aims to replace capitalism with communism, normally with socialism (public ownership over the means of production) as an intermediate stage. ... International Socialism redirects here. ... World revolution is a Marxist concept of a violent overthrow of capitalism that would take place in all countries, although not necessarily simultaneously. ... See also Marxian economics Marxist philosophy or Marxist theory designs work in philosophy which is strongly influenced by Karl Marxs materialist approach to theory or which is written by Marxists. ... Historical materialism is the methodological approach to the study of society, economics, and history which was first articulated by Karl Marx (1818-1883), although Marx himself never used the term (he referred it as philosophical materialism, a term he used to distinguish it from what he called popular materialism). Historical... According to many followers of the theories of Karl Marx (or Marxists), dialectical materialism is the philosophical basis of Marxism. ... Analytical Marxism refers to a style of thinking about Marxism that was prominent amongst English-speaking philosophers and social scientists during the 1980s. ... For other meanings of autonomism, see autonomism (disambiguation) page Raised fist, stenciled protest symbol of Autonome at the Ernst-Kirchweger-Haus in Vienna, Austria Autonomism refers to a set of left-wing political and social movements and theories close to the socialist movement. ... Marxist feminism is a sub-type of feminist theory which focuses on the dismantling of capitalism as a way to liberate women. ... The term Marxist humanism has as its foundation Marxs conception of the alienation of the labourer as he advances it in his Economic and Philosophic Manuscripts of 1844--an alienation that is born of a capitalist system in which the worker no longer functions as (what Marx terms) a... Structural Marxism was an approach to Marxist philosophy based on structuralism, primarily associated with the work of the French philosopher Louis Althusser and his students. ... Western Marxism is a term used to describe a wide variety of Marxist theoreticians based in Western and Central Europe (and more recently North America), in contrast with philosophy in the Soviet Union. ... Libertarian Marxism is a school of Marxism that takes a less authoritarian view of Marxist theory than conventional currents such as Stalinism, Trotskyism, and other forms of Marxism-Leninism, as well as a generally less reformist view than do Social Democrats. ... â€˜Young Marxâ€™ is one half of the concept in Marxology that Karl Marxâ€™s intellectual development can be broken into two board categories, the other being â€˜Mature Marxâ€™. There is disagreement though as to when Marx thought began to mature, Lenin claimed Marxs first mature work as â€œThe Poverty... Karl Heinrich Marx (May 5, 1818, Trier, Germany â€“ March 14, 1883, London) was a German philosopher, political economist, and revolutionary. ... Friedrich Engels (November 28, 1820, Wuppertal â€“ August 5, 1895, London), a 19th-century German political philosopher, developed communist theory alongside his better-known collaborator, Karl Marx, co-authoring The Communist Manifesto (1848). ... Karl Kautsky (October 18, 1854 - October 17, 1938) was a leading theoretician of social democracy. ... G. V. Plekhanov Georgi Valentinovich Plekhanov (Ð“ÐµÐ¾Ñ€Ð³Ð¸Ð¹ Ð’Ð°Ð»ÐµÐ½Ñ‚Ð¸Ð½Ð¾Ð²Ð¸Ñ‡ ÐŸÐ»ÐµÑ…Ð°Ð½Ð¾Ð²) (December 11, 1856 â€“ May 30, 1918; Old Style: November 29, 1856 â€“ May 17, 1918) was a Russian revolutionary and a Marxist theoretician. ... â€œLeninâ€ redirects here. ... (Russian: Ð›ÐµÐ² Ð”Ð°Ð²Ð¸Ð´Ð¾Ð²Ð¸Ñ‡ Ð¢Ñ€Ð¾Ñ†ÐºÐ¸Ð¹, Lyov Davidovich Trotsky, also transliterated Leo, Lev, Trotskii, Trotski, Trotskij, Trockij and Trotzky) (November 7 [O.S. October 26] 1879 â€“ August 21, 1940), born. ... Rosa Luxemburg Rosa Luxemburg (March 5, 1870 or 1871 â€“ January 15, 1919, in Polish RÃ³Å¼a Luksemburg) was a Jewish Polish-born Marxist political theorist, socialist philosopher, and revolutionary. ... â€œMaoâ€ redirects here. ... Georg LukÃ¡cs (April 13, 1885 â€“ June 4, 1971) was a Hungarian Marxist philosopher and literary critic in the tradition of Western Marxism. ... Antonio Gramsci (IPA: ) (January 22, 1891 â€“ April 27, 1937) was an Italian writer, politician and political theorist. ... Karl Korsch (August 15, 1886 - October 21, 1961) was a German Marxist theorist. ... Max Horkheimer (front left), Theodor Adorno (front right), and JÃ¼rgen Habermas in the background, right, in 1965 at Heidelberg The Frankfurt School is a school of neo-Marxist social theory (which is more akin to anarchism than communism), social research, and philosophy. ... Louis Pierre Althusser (Pronunciation: altuË¡seÊ) (October 16, 1918 â€“ October 23, 1990) was a Marxist philosopher. ... Ernesto Guevara de la Serna (June 14,[1] 1928 â€“ October 9, 1967), commonly known as Che Guevara or El Che, was an Argentine-born Marxist revolutionary, medical doctor, political figure, and leader of Cuban and internationalist guerrillas. ... This article is on criticisms of Marxism, a branch of socialism. ... Image File history File links Surplus-value. ... Image File history File links Surplus-value. ... Karl Heinrich Marx (May 5, 1818, Trier, Germany â€“ March 14, 1883, London) was a German philosopher, political economist, and revolutionary. ... Political economy was the original term for the study of production, the acts of buying and selling, and their relationships to laws, customs and government. ... Surplus labour is a concept used by Karl Marx in his critique of political economy. ... In classical economics and all micro-economics labour is one of three factors of production, the others being land and capital. ... In economics, a capitalist is someone who owns capital, presumably within the economic system of capitalism. ... Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ...

The German equivalent word "Mehrwert" means simply value-added, but in Marx's value theory, the extra or surplus-value has a specific meaning, namely the amount of the increase in the value of capital upon investment, i.e. the yield regardless of whether it takes the form of profit, interest or rent. Value added refers to the additional value created at a particular stage of production or through image and marketing. ... In general, the economic value of something is how much a product or service is worth to someone relative to other things (often measured in money). ... This article is about a city that serves as a center of government and politics. ... Invest redirects here. ...

Marx himself regarded the reduction of profit, interest and rent income to surplus-value, and surplus value to surplus labour as one of his greatest theoretical achievements. Surplus labour is a concept used by Karl Marx in his critique of political economy. ...

For Marx, the gigantic increase in wealth and population from the 19th century onwards was mainly due to the competitive striving to obtain maximum surplus-value from the employment of labor, resulting in an equally gigantic increase of productivity and capital resources. To the extent that increasingly the economic surplus is convertible into money and expressed in money, the amassment of wealth is possible on a larger and larger scale (see capital accumulation and surplus product). Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ... Surplus product (German: Mehrprodukt) is a concept explicitly theorised by Karl Marx in his critique of political economy. ...

In the Communist Manifesto, Marx and Engels wrote: Malayalam editon of the Manifesto The Communist Manifesto, also known as The Manifesto of the Communist Party, first published on February 21, 1848 by Karl Marx and Friedrich Engels, is one of the worlds most historically influential political tracts. ...

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature's forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalisation of rivers, whole populations conjured out of the ground -- what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor? This article or section does not cite any references or sources. ... For the specific theoretical justifications behind the Great Leap Forward and the Five Year Plans, see Theory of Productive Forces. ...

Theory of surplus value

The problem of explaining the source of surplus value is expressed by Frederick Engels as follows: Friedrich Engels Friedrich Engels (November 28, 1820 - August 5, 1895) was a German Socialist philosopher and the co-founder of modern Communist theory with Karl Marx. ...

"Whence comes this surplus-value? It cannot come either from the buyer buying the commodities under their value, or from the seller selling them above their value. For in both cases the gains and the losses of each individual cancel each other, as each individual is in turn buyer and seller. Nor can it come from cheating, for though cheating can enrich one person at the expense of another, it cannot increase the total sum possessed by both, and therefore cannot augment the sum of the values in circulation. (...) This problem must be solved, and it must be solved in a purely economic way, excluding all cheating and the intervention of any force — the problem being: how is it possible constantly to sell dearer than one has bought, even on the hypothesis that equal values are always exchanged for equal values?" [1]

Marx's solution was to distinguish between labour-time worked and labour power. A worker who is sufficiently productive can produce an output value greater than what it costs to hire him. Although his wage seems to be based on hours worked, in an economic sense this wage does not reflect the full value of what the worker produces. Effectively it is not labour which the worker sells, but his capacity to work. According to Karl Marx, there is a clear distinction between labor and labor-power in economics. ...

Imagine a worker who is hired for an hour and paid $10, the minimum necessary for him to survive. Once in the capitalist's employ, the capitalist can have him operate a boot-making machine which produces $10 worth of work every fifteen minutes. Every hour, the capitalist receives $40 worth of work and only pays the worker $10, capturing the remaining $30 as surplus value.

The worker cannot capture this benefit directly because he has no claim to the means of production (e.g. the boot-making machine) or to its products, and his capacity to bargain over wages is restricted by laws and the supply/demand for wage labour. Hence the rise of trade unions which aim to create a more favourable bargaining position through collective action by workers. A union (labor union in American English; trade union, sometimes trades union, in British English; either labour union or trade union in Canadian English) is a legal entity consisting of employees or workers having a common interest, such as all the assembly workers for one employer, or all the workers...

Definition of surplus value

Total surplus-value in an economy (Marx refers to the mass or volume of surplus-value) is basically equal to the sum of net distributed and undistributed profit, net interest, net rents, net tax on production and various net receipts associated with royalties, licensing, leasing, certain honorariums etc. (see also value product). Of course, the way generic profit income is grossed and netted in social accounting may differ somewhat from the way an individual business does that (see also Operating surplus). This article or section does not cite any references or sources. ... Interest is the rent paid to borrow money. ... This article is about Economic rent as it pertains to political economy and socioeconomic theory. ... A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements). ... This article or section does not adequately cite its references or sources. ... How to obtain a amature radio licence differs from country to country. ... The value product (VP) is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies. ... Operating surplus is an accounting concept used in national accounts statistics (such as United Nations System of National Accounts (UNSNA) and in corporate and government accounts. ...

Marx's own discussion focuses mainly on profit, interest and rent, largely ignoring taxation and royalty-type fees which were proportionally very small components of the national income when he lived. Over the last 150 years, however, the role of the state in the economy increased in almost every country in the world. Around 1850, the average share of government spending in GDP in the advanced capitalist economies was around 5%; in 1870, a bit above 8%; on the eve of World War I, just under 10%; just before the outbreak of the second world war, around 20%; by 1950, nearly 30%; and today the average is around 35-40%. â€œThe Great War â€ redirects here. ... Mushroom cloud from the nuclear explosion over Nagasaki rising 18 km into the air. ...

Five interpretations of surplus value

Surplus-value may be viewed in five ways:

as a component of the new value product, which Marx himself defines as equal to the sum of labor costs in respect of capitalistically productive labour (variable capital) and surplus-value. In production, he argues, the workers produce a value equal to their wages plus an additional value, the surplus-value. They also transfer part of the value of fixed assets and materials to the new product, equal to economic depreciation (consumption of fixed capital) and intermediate goods used up (constant capital inputs). Labor costs and surplus-value are the monetary valuations of what Marx calls the necessary product and the surplus product, or paid labour and unpaid labour.

Surplus-value can also be viewed as a flow of net income appropriated by the owners of capital in virtue of asset ownership, comprising both distributed personal income and undistributed business income. In the whole economy, this will include both income directly from production and property income.

Surplus-value can be viewed as the source of society's accumulation fund or investment fund; part of it is re-invested, but part is appropriated as personal income, and used for consumptive purposes by the owners of capital assets (see capital accumulation); in exceptional circumstances, part of it may also be hoarded in some way). In this context, surplus value can also be measured as the increase in the value of the stock of capital assets through an accounting period, prior to distribution.

Surplus-value can be viewed as a social relation of production, or as the monetary valuation of surplus-labour - a sort of "index" of the balance of power between social classes or nations in the process of the division of the social product.

Surplus-value can, in a developed capitalist economy, be viewed also as an indicator of the level of social productivity that has been reached by a population.

The value product (VP) is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies. ... Productive and unproductive labour were concepts used in classical political economy mainly in the 18th and 19th century, which survive today to some extent in modern management discussions, economic sociology and Marxist or Marxian economic analysis. ... Constant capital, or c, in Marxian political economy is one of the two forms that capital adopts in the workplace, in contrast to variable capital (v). ... Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ... Constant capital (c), is a concept created by Karl Marx and used in Marxian political economy. ... Surplus product (German: Mehrprodukt) is a concept created by Karl Marx in his critique of political economy. ... Surplus product (German: Mehrprodukt) is a concept explicitly theorised by Karl Marx in his critique of political economy. ... A stock in business and social accounting refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases) during an accounting period. ... Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ... A stock in business and social accounting refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases) during an accounting period. ... Relations of production (German: Produktionsverhaltnisse) is a concept frequently used by Karl Marx in his theory of historical materialism and in Das Kapital. ... Surplus labour is a concept used by Karl Marx in his critique of political economy. ...

Five measures of the rate of surplus value

According to Marx's theory of exploitation, living labour at an adequate level of productivity is able to create and conserve more value than it costs the employer to buy; which is exactly the economic reason why the employer buys it, i.e. to preserve and augment the value of the capital at his command. Thus, the surplus-labour is unpaid labour appropriated by employers in the form of work-time and outputs, on the basis that employers own and supply the means of production worked with. The commercial function of labour is only to conserve their value, add value to them, and transfer value. The term exploitation may carry two distinct meanings: The act of utilizing something for any purpose. ... Surplus labour is a concept used by Karl Marx in his critique of political economy. ... Means of production (abbreviated MoP; German: Produktionsmittel), also called means of labour are the materials, tools and other instruments used by workers to make products. ...

According to Marx's labor theory of value, human labor is the only source of net new economic value, but is also indispensable for the conservation and transfer of economic value (maintenance and redistribution of capital assets). Asset revaluations according to this theory only redistribute claims to product-value which has already been created previously. The labor theory of value (LTV) is a theory in classical economics concerning the value of an exchangeable good or service. ...

The rate of surplus-value in production is defined by Marx as the volume of surplus-value produced by the workforce divided by the variable capital (or labour-costs) expended to produce it (the ratio S/V). This is very roughly equivalent to the profits/wages ratio, though there is debate in Marxian economics about what exact profit and wage measures should be used. After all, total labour costs often involve far more than wage payments, and profits can be "grossed" and ""netted" in different ways. Constant capital, or c, in Marxian political economy is one of the two forms that capital adopts in the workplace, in contrast to variable capital (v). ... Note: Marxian is not restricted to Marxian economics, as it includes those inspired by Marxs works who do not identify with Marxism as a political ideology. ...

Alternative measures Marx cites are:

surplus value divided by the value of labour-power,

surplus labour divided by necessary labour

[the value of] unpaid labour divided by [the value of] paid labour, expressible in hours worked or money units

the surplus product divided by necessary product. (see Das Kapital, vol. 1, chapter 28).

The five measures of the rate of surplus value mentioned do not all refer to the same thing exactly (see further rate of exploitation and surplus product). However, the basic meaning of the rate of surplus value is always the rate of exploitation of living labour-capacity, i.e. the net yield obtained from the employment of living labour. Marx usually assumed in his models that the rate of surplus-value would be the same in all industries, different rates being equalised to a general norm in an open market for capital and labour. In reality, this is probably not the case, i.e. the rates may vary. Labor power (in German: Arbeitskraft, or labor force) is a crucial concept used by Karl Marx in his critique of political economy. ... Surplus labour is a concept used by Karl Marx in his critique of political economy. ... Surplus labour is a concept used by Karl Marx in his critique of political economy. ... Surplus product (German: Mehrprodukt) is a concept explicitly theorised by Karl Marx in his critique of political economy. ... Surplus product (German: Mehrprodukt) is a concept created by Karl Marx in his critique of political economy. ... Das Kapital (Capital, in the English translation) is an extensive treatise on political economy written by Karl Marx in German. ... The rate of exploitation is a concept in Marxian political economy. ... Surplus product (German: Mehrprodukt) is a concept explicitly theorised by Karl Marx in his critique of political economy. ...

Some authors have interpreted this "rate of exploitation" as a purely economic or commercial concept (in the sense of "labor utilisation", the use of a resource) while others see it primarily as a moral or political concept referring to the domination of a social class which commands labour in virtue of ownership of capital assets. Economics (deriving from the Greek words Î¿Î¯ÎºÏ‰ [okos], house, and Î½ÎÎ¼Ï‰ [nemo], rules hence household management) is the social science that studies the allocation of scarce resources to satisfy unlimited wants. ... This article or section does not cite any references or sources. ... A moral is a one sentence remark made at the end of many childrens stories that expresses the intended meaning, or the moral message, of the tale. ... Politics is the process by which decisions are made within groups. ...

Equalization of rates of surplus value

Marx believed that the long-term historical tendency would be for differences in rates of surplus value between enterprises and economic sectors to level out:

"If capitals that set in motion unequal quantities of living labour produce unequal amounts of surplus-value, this assumes that the level of exploitation of labour, or the rate of surplus-value, is the same, at least to a certain extent, or that the distinctions that exist here are balanced out by real or imaginary (conventional) grounds of compensation. This assumes competition among workers, and an equalization that takes place by their constant migration between one sphere of production and another. We assume a general rate of surplus value of this kind, as a tendency, like all economic laws, as a theoretical simplification; but in any case this is in practice an actual presupposition of the capitalist mode of production, even if inhibited to a greater or lesser extent by practical frictions that produce more or less significant local differences, such as the settlement laws for agricultural labourers in England, for example. In theory, we assume that the laws of the capitalist mode of production develop in their pure form. In reality, this is only an approximation; but that approximation is all the more exact, the more the capitalist mode of production is developed and the less it is adulterated by survivals of earlier economic conditions with which it is amalgamated " - Capital Vol. 3, ch. 10, Pelican edition p. 275.

[2]

This is why he felt justified assuming a uniform rate of surplus value in his models of how surplus value would be shared out under competitive conditions.

Complicating factors in assessing surplus value

Complicating factors in assessing surplus-value are:

state intermediation, where profit and wage income is taxed on the one side, and supplemented on the other with subsidies and grants of various kinds;

Backwardation of certain physical goods in which time and presance are drivers of price.

employee and employer contributions to social security and health schemes (wage costs and total labour costs may not be equal);

price inflation applying to wage goods, profit and capital goods;

creative accounting and tax avoidance or evasion techniques which misrepresent how much value has really been created.

income obtained from what Marx called "fictitious capital" or what now are often called "bubble" phenomena.

unsold inventories of net outputs which contain surplus-value.

These phenomena often make it difficult to calculate what the real net wage income is, and what the real net profit income is; there may be a very significant difference between gross income and disposable income. A state is a political association with effective dominion over a geographic area. ... This article or section does not cite any references or sources. ... A wage is a compensation which workers receive in exchange for their labor. ... A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements). ... Backwardation, sometimes incorrectly referred to as backwardization, is the situation where futures contracts closer to expiration trade at higher prices than those that are far from expiration. ... Creative accounting and earnings management are euphemisms referring to accounting practices that may or may not follow the letter of the rules of standard accounting practices but certainly deviate from the spirit of those rules. ... A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements). ... Fictitious capital is a concept used by Karl Marx in his critique of political economy. ...

In modern society, the complexity of transactions can often seem almost impenetrable or opaque. People may become less concerned with issues of exploitation, rather their concern may just simply be with defending their entitlement to a secure real net income ("take home pay") from the work they do, or from any other source.

How the exchange between capital and labour happens to be viewed, depends greatly on the balance of power between employers and employees, and on the ability for all parties to the exchange to make gains from the trade in human labor. People would not usually trade unless they made a positive gain by it, but obviously the gains could be very unequally distributed among different parties to the trade. The more real net income capitalists and workers lose, the more concerned they become about fair exchange and exploitation.

Origin of the forms of surplus-value in trade

Surplus-value is not a fixed category but a dialectical, developing one, because the forms in which new value is created and appropriated, and the way the burdens of productive work are shifted between strata of the population, change over time. There is obviously a big difference between simple commodity producers exchanging agricultural surpluses in a village market, and "fast money" in today's global money markets.

Historically, Marx argues, surplus-value originated outside production in the first commercial forms of exchange - usury, merchant, rentier and bank capital and their associated lending operations. Thus, the first forms of surplus-value include (leaving aside extortion and robbery etc.) profits from simple commodity production, merchants' profit from "buying cheap and selling dear" or unequal exchange, certain types of rent imposed on production, and interest on loans extended by financiers, bankers and usurers. In Europe, "share" certificates of the joint-stock type date from the 16th century. Commodity is a term that refers to goods that are mined or agriculturally produced. ... Unequal exchange is a concept used in Marxian economics to denote forms of exploitation which commercial trade of any type can involve, if objects of unequal value are being exchanged or traded. ... Interest is the rent paid to borrow money. ...

In ancient and feudal society, the ability to appropriate surplus-value from trade in commodities and capital was usually strongly regulated, and limited by the state and religious authorities; a universal market where almost everything could be bought and sold freely using money did not exist.

Originally, as Marx explicitly notes, commercial trade emerged at the boundaries of economic communities based on a non-capitalist mode of production, and it is only when commerce begins to dominate and regulate the bulk of production itself, that it becomes clearer that the ultimate source, or substance, of all surplus-value is really surplus-labour. This article or section does not adequately cite its references or sources. ... In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production (in German: Produktionsweise, meaning the way of producing) is a specific combination of: productive forces: these include human labor-power, tools, equipment, buildings and technologies, materials, and improved land social and technical relations... This article or section does not cite any references or sources. ... Surplus labour is a concept used by Karl Marx in his critique of political economy. ...

The processes whereby capitalist commerce conquers direct control of production are however very lengthy and complicated ones; all kinds of socio-economic obstacles ("market rigidities") must be cleared away, and new institutions created, before all the necessary factors of production can be freely bought and sold as inputs and outputs. A good example of that is modern China. In economics, factors of production are resources used in the production of goods and services. ...

Appropriation of surplus-value from production

Both in Das Kapital and in preparatory manuscripts such as the Grundrisse and Results of the immediate process of production, Marx shows how commerce by stages transforms a non-capitalist production process into a capitalist production process, integrating it fully into markets, so that all inputs and outputs become marketed goods or services. When that process is complete, the whole of production has become simultaneously a labor process creating use-values and a valorisation process creating new value, and more specifically a surplus-value appropriated as net income (see also capital accumulation). Das Kapital (Capital, in the English translation) is an extensive treatise on political economy written by Karl Marx in German. ... In Marxs critique of political economy, any labor-product has a value and a use value, and if it is traded as a commodity in markets, it additionally has an exchange value, most often expressed as a money-price. ... The valorization of capital is a concept created by Karl Marx in his critique of political economy. ... Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ...

In fact, Marx argues that the whole purpose of production in this situation becomes the growth of capital, i.e. that production of output becomes conditional on capital accumulation. If production becomes unprofitable, capital will be withdrawn from production sooner or later. Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ...

This means, systemically, that the main driving force of capitalism becomes the quest to maximise the appropriation of surplus-value augmenting the stock of capital. The overriding motive behind efforts to economise resources and labor is to obtain the maximum possible increase in income and capital assets ("business growth"), and provide a steady or growing return on investment.

Absolute and relative surplus value

According to Marx, absolute surplus value is obtained by increasing the amount of time worked per worker in an accounting period. Marx talks mainly about the length of the working day or week, but in modern times the concern is about the number of hours worked per year.

In many parts of the world, as productivity rose, the working classes forced a reduction in the workweek, from 60 hours to 50, 40 or 35 hours; but casualisation and flexibilisation of working hours also permits higher paid workers to work less (a fact of concern to statesmen who worry about international competitiveness, i.e. if we don't work harder our country will lose business).

Relative surplus value is obtained mainly by

reducing wages — this can only go to a certain point, because if wages fall bellow the ability of workers to purchase their means of subsistence, they will be unable to reproduce themselves and the capitalists will not be able to find sufficient labor power.

reducing the cost of wage-goods by various means, so that wage increases can be curbed.

increasing the productivity and intensity of labour generally, through mechanisation and rationalisation, yielding a bigger output per hour worked.

The attempt to extract more and more surplus-value from labor on the one side, and on the other side the resistance to this exploitation, are according to Marx at the core of the conflict between social classes, which is sometimes muted or hidden, but at other times erupts in open class warfare and class struggle. Labor power (in German: Arbeitskraft, or labor force) is a crucial concept used by Karl Marx in his critique of political economy. ... For other uses, see Conflict (disambiguation). ... A social class is, at its most basic, a group of people that have similar social status. ... Class struggle is class conflict looked at from a Marxist, libertarian socialist, or anarchist perspective. ...

One will often hear a Marxist talking about class struggle, but in reality there is a big difference between class conflict and class struggle. A class conflict may exist and fester for a long time, without classes being able and willing to organise any mass struggle actively. Employers may provoke a strategic fight in order to demolish workers' militancy in a critical area; or, mass revolts of workers are sparked off by moral outrage about some event, or because conditions have become intolerable. No easy generalisations are possible, especially because the moods, feelings and inclination to act of social classes can change very rapidly; bursts of mass action can take most people by surprise. Marxism is the political practice and social theory based on the works of Karl Marx, a 19th century philosopher, economist, journalist, and revolutionary, along with Friedrich Engels. ... Class struggle is class conflict looked at from a Marxist, libertarian socialist, or anarchist perspective. ...

Production versus realisation of surplus-value

Marx distinguished sharply between value and price, in part because of the sharp distinction he draws between the production of surplus-value and the realisation of profit income. Output may be produced containing surplus-value (valorisation), but selling that output (realisation) is not at all an automatic process. In economics and business, the price is the assigned numerical monetary value of a good, service or asset. ... The valorization of capital is a concept created by Karl Marx in his critique of political economy. ...

Until payment from sales is received, it is uncertain how much of the surplus-value produced will actually be realised as profit from sales. So, the magnitude of profit realised in the form of money and the magnitude of surplus-value produced in the form of products may differ greatly, depending on what happens to market prices and the vagaries of supply and demand fluctuations. This insight forms the basis of Marx's theory of market value, prices of production and the tendency of the rate of profit of different enterprises to be levelled out by competition. Prices of production refers to a concept in Karl Marxs critique of political economy. ...

In his published and unpublished manuscripts, Marx went into great detail to examine many different factors which could affect the production and realisation of surplus-value. He regarded this as crucial for the purpose of understanding the dynamics and dimensions of capitalist competition, not just business competition but also competition between capitalists and workers and among workers themselves. But his analysis did not go much beyond specifying some of the overall outcomes of the process. Competition is the act of striving against another force for the purpose of achieving dominance or attaining a reward or goal, or out of a biological imperative such as survival. ...

His main conclusion though is that employers will aim to maximise the productivity of labour and economise on the use of labour, to reduce their unit-costs and maximise their net returns from sales at current market prices; at a given ruling market price for an output, every reduction of costs and every increase in productivity and sales turnover will increase profit income for that output. The main method is mechanisation, which raises the fixed capital outlay in investment. Fixed capital is a concept in economics and accounting, first theoretically analysed in some depth by the economist David Ricardo. ...

In turn, this causes the unit-values of commodities to decline over time, and a decline of the average rate of profit in the sphere of production occurs, culminating in a crisis of capital accumulation, in which a sharp reduction in productive investments combines with mass unemployment, followed by an intensive rationalisation process of take-overs, mergers, fusions, and restructuring aiming to restore profitability. The tendency of the rate of profit to fall, commonly abbreviated to TRPF, is a hypothesis in economics and political economy, generally accepted in the 19th century, but mostly rejected by mainstream economists today. ... Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ...

The significance of the mass of surplus value

Most Marxist discussions focus on the rate of surplus value, but for businessmen, the growth of the mass of surplus-value, or the profit volume produced (denoted here as P) is just as important, or even more important. The growth of P depends on the growth of the volume of output in an accounting period, and the volume of sales turnover.

We can illustrate the point with a simplified example. If:

K = total capital invested
P = total net profit volume realised
r = the rate of profit (i.e. P/K),

and assuming (perhaps unrealistically) that a sum equal to P is reinvested (with or without the aid of credit) with zero price inflation, we can construct a series of annual business results, starting off with K= 1 million and r = 10% where the profit rate declines by a constant 0.1% per annum:

year 1: K = 1,000,000; P = 100,000; r = 10%
year 2: K = 1,100,000; P = 108,900; r = 9.9%
year 3: K = 1,208,900; P = 118,472; r = 9.8%

We see here that within two years at least, an 18.5% increase in annual profit volume has occurred, even although the rate of profit decreased by 0.2%. In other words, there's nearly one-fifth more income to disburse to the owners of the capital, although the rate of return fell slightly.

What this simplistic example really implies is that, provided market sales keep growing and business expands, a slight fall in the profit rate on capital may not be a point of concern. After all, capital assets have grown, but more importantly, the total volume of revenue that can be distributed has grown.

However, if the total profit volume created in a capitalist economy stops growing, this becomes a real problem (as highlighted by Henryk Grossman). Because in that case, profitability must fall across the board, and business income is reduced everywhere. Henryk Grossman/Grossmann (1881-1950) was born in KrakÃ³w and studied law and economics in KrakÃ³w and Vienna. ...

In some Marxist crisis theories (e.g. by Grossmann and Paul Mattick), the root cause of economic crisis is precisely that the growth of profit volume is eclipsed by the decline of the profit rate in production, the result being that the total profit volume that can be distributed stagnates or falls. Paul Mattick (1904-1981): Born in Pomerania in 1904 and raised in Berlin by class conscious parents, Mattick was already at the age of 14 a member of the Spartacists Freie Sozialistische Jugend. ...

The overall implication is that market expansion is critical for the total volume of surplus-value that can be distributed as profit. Total business income can increase, even although the profit rate on capital invested falls, if markets keep growing.

Surplus value and taxation

In general, business leaders and investors are hostile to any attempts to encroach on total profit volume, especially those of government taxation. The lower taxes are, other things being equal, the bigger the mass of profit that can be distributed as income to private investors. It was tax revolts that originally were a powerful stimulus motivating the bourgeoisie to wrest state power from the feudal aristocracy at the beginning of the capitalist era. This article or section does not cite any references or sources. ... Forms of government Part of the Politics series Politics Portal This box: The term aristocracy refers to a form of government where power is hereditary, and split between a small number of families. ...

In reality, of course, a substantial portion of tax money is also redistributed to private enterprise in the form of government contracts and subsidies. If that had not been the case, the tax take would never have been permitted to rise to a quarter or a third of gross product. Capitalists may therefore be in conflict among themselves about taxes, since what is a cost to some, is a source of profit to others. Marx never analysed all this in detail; but the concept of surplus value will apply mainly to taxes on gross income (personal and business income from production) and the trade in products & services. Estate duty for example rarely contains a surplus value component, although profit could be earned in the transfer of the estate.

Generally, Marx seems to have regarded taxation imposts as a "form" which disguised real product values. Apparently following this view, Ernest Mandel in his 1960 treatise Marxist Economic Theory refers to (indirect) taxes as "arbitrary additions to commodity prices". But this is something of a misnomer, and disregards that taxes become part of the normal cost-structure of production. In his later treatise on late capitalism, Mandel astonishingly hardly mentions the significance of taxation at all, a very serious omission from the point of view of the real world of modern capitalism (see E. Mandel, Late Capitalism. London: Verso, 1975) Ernest Mandel Ernest Ezra Mandel, also known by various pseudonyms such as Ernest Germain, Pierre Gousset, Henri Vallin, Walter etc. ... Late capitalism is a term sometimes used to refer to capitalism of the late 20th century. ...

Surplus value and the circuits of capital

Generally, Marx focused in Das Kapital on the new surplus-value generated by production, and the distribution of this surplus value. In this way, he aimed to reveal the "origin of the wealth of nations" given a capitalist mode of production. However, in any real economy, a distinction must be drawn between the primary circuit of capital, and the secondary circuits. To some extent, national accounts also do this. Das Kapital (Capital, in the English translation) is an extensive treatise on political economy written by Karl Marx in German. ... The capitalist mode of production is a concept in Karl Marxâ€™s critique of political economy. ... Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ...

The primary circuit refers to the incomes and products generated and distributed from productive activity (reflected by GDP). The secondary circuits refer to trade, transfers and transactions occurring outside that sphere, which can also generate incomes, and these incomes may also involve the realisation of a surplus-value or profit.

It is true that Marx argues no net additions to value can be created through acts of exchange, economic value being an attribute of labour-products (previous or newly created) only. Nevertheless trading activity outside the sphere of production can obviously also yield a surplus-value which represents a transfer of value from one person, country or institution to another.

A very simple example would be if somebody sold a second-hand asset at a profit. This transaction is not recorded in gross product measures (after all, it isn't new production), nevertheless a surplus-value is obtained from it. Another example would be capital gains from property sales. Marx occasionally refers to this kind of profit as profit upon alienation, alienation being used here in the juridical, not sociological sense. By implication, if we just focused on surplus-value newly created in production, we would underestimate total surplus-values realised as income in a country. This becomes obvious if we compare census estimates of income & expenditure with GDP data. Look up alienation, alienate in Wiktionary, the free dictionary. ...

This is another reason why surplus-value produced and surplus-value realised are two different things, although this point is largely ignored in the economics literature. But it becomes highly important when the real growth of production stagnates, and a growing portion of capital shifts out of the sphere of production in search of surplus-value from other deals.

Nowadays the volume of world trade grows significantly faster than GDP, suggesting to Marxian economists such as Samir Amin that surplus-value realised from commercial trade (representing to a large extent a transfer of value by intermediaries between producers and consumers) grows faster than surplus-value realised directly from production. This article or section does not adequately cite its references or sources. ... Samir Amin (b. ...

Thus, if we took the final price of a good (the cost to the final consumer) and analysed the cost structure of that good, we might find that, over a period of time, the direct producers get less income and intermediaries between producers and consumers (traders) get more income from it. That is, control over the access to a good, asset or resource as such may increasingly become a very important factor in realising a surplus-value. In the worst case, this amounts to parasitism or extortion. Mites parasitising a harvestman Parasitism is one version of symbiosis (living together), a phenomenon in which two organisms which are phylogenetically unrelated co-exist over a prolonged period of time, usually the lifetime of one of the individuals. ... Extortion is a criminal offense, which occurs when a person either obtains money, property or services from another through coercion or intimidation or threatens one with physical harm unless they are paid money or property. ...

Measurement of surplus value

The first attempt to measure the rate of surplus-value in money-units was by Marx himself in chapter 9 of Das Kapital, using factory data of a spinning mill supplied by Friedrich Engels (though Marx credits "a Manchester spinner"). Both in published and unpublished manuscripts, Marx examines variables affecting the rate and mass of surplus-value in detail. Das Kapital (Capital, in the English translation) is an extensive treatise on political economy written by Karl Marx in German. ... Friedrich Engels (November 28, 1820, Wuppertal â€“ August 5, 1895, London), a 19th-century German political philosopher, developed communist theory alongside his better-known collaborator, Karl Marx, co-authoring The Communist Manifesto (1848). ...

Some self proclaimed Marxist thinkers like Geoffrey Pilling and Ira Gerstein have argued that surplus value "cannot be measured", but that was demonstrably not the view of Marx and Engels themselves. The real question was how accurately it could be measured, and this depended on the publicly available data. We can develop statistical indicators of trends, without mistakenly conflating data with the real thing they represent, or postulating "perfect measurements or perfect data" in the empiricist manner. If theory is not disciplined by valid data, it becomes metaphysical, rather than being scientific. Empiricism is generally regarded as being at the heart of the modern scientific method, that our theories should be based on our observations of the world rather than on intuition or faith; that is, empirical research and a posteriori inductive reasoning rather than purely deductive logic. ... Plato and Aristotle (right), by Raphael (Stanza della Segnatura, Rome). ...

Since the pioneering studies by Marxian economists like Eugen Varga, Charles Bettelheim, Joseph Gillmann, Edward Wolff and Shane Mage, there have been numerous attempts by Marxian economists to measure the trend in surplus-value statistically using national accounts data. The most convincing modern attempt is probably that of Professors Anwar Shaikh & Ahmet Tonak [3]. Eugen Samuilovich Varga (November 6, 1879 â€“ October 7, 1964) was a Marxist economist of Hungarian origin. ... Charles Bettelheim (born November 20, 1913) is a French economist and historian, founder of the Center for the Study of Modes of Industrialization (CEMI : Centre pour lÃ‰tude des Modes dIndustrialisation) at the Sorbonne), economic advisor to the governments of several developing countries during the period of decolonization. ...

Usually this type of research involves reworking the components of the official measures of gross output and capital outlays to approximate Marxian categories, in order to estimate empirically the trends in the ratios thought important in the Marxian explanation of capital accumulation and economic growth: the rate of surplus-value, the organic composition of capital, the rate of profit, the rate of increase in the capital stock, and the rate of reinvestment of realised surplus-value in production. Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ... This article needs additional references or sources to facilitate its verification. ... The production of surplus value, from Karl Marxs Capital in Lithographs, by Hugo Gellert, 1934 Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving... The organic composition of capital (OCC) is a concept created by Karl Marx in his critique of political economy and used in Marxian economics as a theoretical alternative to neo-classical concepts of factors of production, production functions, capital productivity and capital-output ratios. ... In economics, the profit rate refers to the relative profitability of an investment project or of a capitalist enterprise or for the capitalist economy as a whole. ...

The Marxian mathematicians Emmanuel Farjoun and Moshé Machover argue that "even if the rate of surplus value has changed by 10-20% over a hundred years, the real problem [to explain] is why it has changed so little" (quoted from The Laws of Chaos; A Probabilistic Approach to Political Economy (1983), p. 192). The answer to that question must, in part, be sought in artifacts (statistical distortion effects) of data collection procedures. Mathematical extrapolations are ultimately based on the data available, but that data itself may be fragmentary and not the "complete picture".

Experienced financial analysts are, however, liable to shake their heads at these kinds of Marxian empirical estimates from official data. As regards total profit volume, statisticians use survey data, administrative records, and tax data to estimate it, consistent with a standard definition of gross product and capital transactions. But this may include or exclude items at variance with real business practice. Some types of transactions are disregarded, while imputations are made for other transactions. Almost always tax data is the main source of generic profit estimates, but tax data typically understate true profitability.

Or, if the rate of profit is measured as a ratio between the total profit component in value added and fixed capital, what is ignored is that capital assets include more than fixed assets, and that profit income includes more than the value added component. So to assess profit volume or profitability, really the problem has to be looked at using a variety of different measures and a variety of difference sources (national accounts data, tax data, direct surveys, company reports and circumstantial evidence). Fixed capital is a concept in economics and accounting, first theoretically analysed in some depth by the economist David Ricardo. ...

As against that, it can also be shown statistical

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