The Critique of Capitalism and Exploitation
The main aspect of Marx’s critique of capitalism lies in the thesis that capitalist societies are based on the exploitation of the workers by the capitalists. In order to demonstrate this thesis Marx introduced the distinction between labour, the exercise in real practice of some productive activity, and labour power, the worker as a person, incorporating the potential to exercise a productive activity. The distinction between labour and labour power may be compared to the difference between heat and a specific source of heat, for instance coal. Coal is the commodity bought and sold on the market, at a price such as to cover its costs of production. The buyer then utilises coal to get heat but could utilise it for other purposes, for instance writing on a wall or in any other way: once bought, the commodity belongs to the buyer and can be utilised as s/he likes. Something of the sort happens in the relationship between worker and capitalist. The commodity sold by the worker is labour power, or work capacity; the capitalist pays for it at its value, or in other words s/he pays enough to cover the costs for its production, corresponding to the means of subsistence required to keep the worker alive (together with the worker’s family, so as to ensure substitution of the worker when s/he retires or dies). Thus the value of labour power corresponds to a minimum subsistence wage. On paying for it, the capitalist acquires the right to utilise the worker in the productive process, to get from her/him a given number of daily (or weekly) hours of labour that as a rule is greater than the value of the labour power, or the number of hours of labour ‘contained’ in the worker’s daily means of subsistence. The total amount of labour performed in our economic system may then be divided into two parts: the necessary labour, required to produce the means of subsistence for all the workers employed within the economy, and the surplus labour, all the rest of the labour performed, equal to the difference between total social labour and necessary labour.
This representation of an economic system presupposes separation of the workers from ownership of the product and of their means of production. Capital, understood as the capacity to control means of production and labour power itself, is in Marx’s opinion above all a social relation of production, expressing the subordination of the workers to the capitalists. The origin of capital in this sense of the term coincides with the formation of a class of workers dispossessed of their means of production and is the result of a long social process that Marx called ‘primary accumulation’ and which marks the transition from feudalism to capitalism.
Marx took up the labour theory of value from Ricardo. The annual national product has, then, a value equal to the quantity of labour employed during the year, L. With a wage rate equal to the subsistence minimum, the total wage of all workers in the economy has a value equal to necessary labour, LN. The surplus has a value equal to the labour time exceeding necessary labour, or surplus labour PL (= L — LN), going to the capitalists in the form of profits P (and to landlords in the form of rent, but for the sake of simplicity here we will disregard this element, as well as financial capital and interests, which Marx and the classical economists considered part of the profits). Thus, even if the workers receive the full value of the commodity they sell (namely their labour power, the value of which as we saw is equal to its cost of production), or in other words even if what Marx considered the criterion of economic justice under capitalism - exchange of equal values - does indeed hold, the surplus value going to the capitalists corresponds to unpaid labour, and hence to exploitation of the workers by the capitalists.
Marx defined the rate of exploitation s as ratio of ‘unpaid labour’ or surplus labour to ‘paid labour’ or value of labour power; hence s = PL/LN. The rate of exploitation therefore depends on both the length of the working day and the share of it corresponding to necessary labour, and so to the value of labour power. Marx distinguished in this respect between absolute surplus value, due to a lengthened working day, and relative surplus value, resulting from a reduction in the value of labour power.
The rate of exploitation is equal to the rate of profits (given by the ratio between profits and capital advanced) only when the capital advanced consists solely of wages, or in other words when the workers do not utilise means of production (raw materials, tools and machinery). However, such an assumption contradicts the very nature of the capitalistic system, where the capitalists’ role precisely derives from their control over the means of production. Thus, in general the capital advanced also includes means of production other than labour, and the rate of profits will be lower than the rate of exploitation. Therefore the rate of profits gives a reductive idea of the exploitation of the workers by the capitalists.
With his theory of exploitation Marx showed how the surplus emerges from the productive process and not from the circulation of commodities. The latter thesis is described as profit upon alienation, the idea being that profits accrue from buying at low prices and selling at high prices. Marx attributed this thesis to the mercantilists and attacked it vehemently. According to Marx, in the sphere of circulation ‘liberty, equality, property and Jeremy Bentham are supreme’: liberty, since everybody enters freely into exchange agreements; equality, because ‘the buyer and the seller ... exchange equivalent for equivalent’; property, ‘because each of them disposes exclusively of his own’; Bentham (that is, utilitarianism) since ‘the power ... which makes them enter into relation one with another, is self-interest, and nothing more’.
Marx aimed this criticism not only at mercantilist thought but also at the various socialist currents that condemned profits as unjust deduction from the fruits of labour, a group including both the Ricardian socialists and anti-capitalistic writers such as Proudhon (known for his motto: ‘property is theft’). Marx stressed that his was a ‘scientific socialism’, which recognised that the equitable criterion of exchange of equals was honoured in the capitalist system.
The profit upon alienation thesis can be represented by the scheme M - C - M’, where M indicates money and C commodities: money M buys commodities C that are then sold again for a greater sum of money, M’. This scheme violates the rule of exchange of equals: if C is equivalent to M in the first step, it cannot be equivalent to M’ in the second step. Marx proposed, instead, a scheme that represented the process of circulation and the process of production simultaneously,
where exchanges are represented by hyphens and the productive process by a series of dots: money M buys commodities, and more precisely labour power LP and means of production MP; through the productive process we get a different set of commodities, C’, which is exchanged for a sum of money, M’, greater than the initial sum. The value of the means of production other than labour is transmitted unchanged in the value of the product; the profit P (= M’ — M) originates from the fact that labour power transmits to the value of the product not only its own value
(equal to the value of its means of subsistence) but also the surplus labour or unpaid labour.
Exploitation can be overcome, Marx held, with transition to still more advanced modes of production, socialism first, and then communism. Socialism is characterised by collective property of the means of production. Marx considered transition from capitalism to socialism a necessary consequence of certain ‘laws of movement of capitalism’: the growing bipolarisation of society between an increasingly vast, ever poorer proletariat (the ‘law of increasing misery’) and an increasingly strong but numerically small bourgeoisie (the ‘law of capitalistic concentration’); such bipolarisation must of necessity end in revolution.
The theory of exploitation relies on the labour contained theory of value to express in homogeneous terms the different magnitudes (product, means of subsistence, surplus). Like Ricardo, Marx too was conscious of the fact that exchange values determined on the basis of the labour theory of value do not correspond to the prices at which commodities are exchanged in competitive markets, where the rate of profits is uniform throughout all sectors of the economy. The labour theory of value can at best be utilised as an initial approximation, provided that it can then be shown, as a second step, not to have led to irremediable errors. As we shall see later, Marx set out to tackle this crucial weak point in his theory in Book 3 of Capital, but the solution he proposed - the so-called transformation of labour values into prices of production - also proved insufficient, with the consequence that a number of crucial elements of the Marxian theoretical castle must be called into question, including the theory of exploitation itself.
-  Marx (1867-94, book 1,pp. 164).
-  Pierre-Joseph Proudhon (1809-1865), French typesetter and proof-reader, self-definedanarchist, supporter of projects for monetary reform and advocate of associationism,followed the ‘Ricardian socialists’ in deducing from the labour theory of value the thesisthat profits, interests and rents are ‘unearned income’. His main work, What Is Property?,was published in 1840.