Relative Surplus Value
Relative Surplus Value
Relative surplus value is a concept introduced by Karl Marx in chapter 12 of the first volume of his book Capital (1867). One of the key objectives of this book was to explain the origins of capitalist profit. Marx argued that profits could not arise simply from trading between commodity owners because such trade was what von Neumann (1944) would later call a zero sum game. Instead, the source of profit had to be sought outside the sphere of circulation in the process of capitalist production. Here, labor power that had been purchased by the capitalist was set to work to make things. The amount of value created by the laborers would be proportional to the number of hours worked whereas the sum advanced by the capitalist to purchase labor power would be proportional to the value of that labor power itself as a commodity. Laboring power was the ability to perform work, a concept analogous to Watt’s rating of the cotton mill engine’s ability to perform work in terms of normalized horsepower. Because the ability to perform work and the work actually done by employees are distinct, the zero sum game is avoided.
Marx argued that there were systematic processes in a capitalist economy that caused the value of labor power to be less than the value created during the working day. The first of these was the prolongation of working hours beyond preindustrial levels to twelve or fourteen hours a day. This lengthening of the day, which he termed absolute surplus value, was the principle source of profit during the early encroachments of capitalist production on an economic sector. During this phase the technology of production would be comparatively static, still depending on hand-operated tools.
The real revolution in production came with mechanization, which enabled the production of relative surplus value. Individual capitalists had an incentive to introduce new machinery because it gave them a competitive advantage. When power looms, for example, were first introduced, the mills using them could produce cloth using less labor than the competing hand-loom weavers. Because the market value of cloth was still regulated by the dominant hand looms, the powered mills earned higher profits. The hand-loom weavers were squeezed and eventually ruined by the process.
The surplus profit accruing to innovators was transitory, vanishing once the new technology was generally adopted, but it drove a process of continuous technical change. It was this change, operating at the level of the whole economy, that produced relative surplus value. Commodities entering into the consumption of the laboring classes—bread, coal, cotton clothing—were being constantly cheapened by innovation. This tended to reduce the value of labor power across the whole economy. The industrial revolution in textiles, mining, and mechanized agriculture had thus increased profits in all other sectors of the economy because labor power could now be purchased more cheaply. The constant efflux of impoverished handicraft producers onto the labor market also acted to force down wages. Accumulation of wealth by the new factory owners went hand in hand with an absolute immiserization of the mass of the population.
The possibility of innovator profit was always there, so the drive to produce relative surplus value was an invariant structural feature of capitalism. Unlike all previous exploiting classes, capitalists were forced to constantly transform the conditions of production. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty, and agitation distinguished the bourgeois epoch from all earlier ones.
The basic mechanism set out by Marx seems to accurately describe the broad economic transformation of the world economy over the nineteenth and twentieth centuries. Indeed, it seems more credible than ever in the epoch of globalization. However, taken at its face value, it would predict a constantly rising rate of surplus value over the period of capitalist history, and whether this has actually occurred is questionable. Evidence shows that the rise of surplus value due to mechanization has at times been offset by increased real wages. The production of relative surplus value may be seen as a process that interacts with other forces, including demographic ones, to regulate the overall level of profits. In countries with a stagnant or declining working population, shortages of labor power allow some of the gains of technological change to be transferred to the working classes. These factors were probably important in developed countries during the mid-twentieth century. The extent to which these offsetting tendencies will operate in the period of globalization is still an open question.
SEE ALSO Labor Theory of Value; Profitability; Profits; Rate of Profit; Surplus Value; Value
Marx, Karl. 1867. Capital: A Critique of Political Economy. Vol. 1. Trans. Ben Fowkes. London: Penguin, 1976.
von Neumann, John, and Oskar Morgenstern. 1944. Theory of Games and Economic Behavior. Princeton, NJ: Princeton University Press.
W. Paul Cockshott