How does the ruling elite get rich from our labour while paying us what they claim is a “fair wage”? Amy Leather explains Karl Marx’s revolutionary answer to this riddle
The term “exploitation” typically conjures up images of horrendous working conditions, perhaps sweatshops in China or India, or the child labour used by Western clothes manufacturers. We think of people working long hours for little pay in terrible conditions ruthlessly bullied by unscrupulous bosses or gangmasters.
Such “exploitation” is presented to us as exceptional—and contrasted with the “normality” of working life for most people, particularly in countries such as Australia.
Karl Marx had a different understanding of exploitation. Rather than seeing it as exceptional, he argued that exploitation is fundamental to capitalism.
For Marx, exploitation was not just about the level of wages received, or working conditions, but was the very process whereby capitalism creates profit out of the work we do.
In order to understand what Marx meant by exploitation we need to start with his explanation of where profits ultimately come from—the “labour theory of value”.
Marx argued that human labour is the source of all value. At the time many economists agreed with this. But Marx went further —he argued that the amount of value created by people when they work is greater than the amount they receive back in wages.
Therefore the capitalist is stealing from workers some of the value that their labour has created. This “surplus value” forms the basis of profit.
This argument is an anathema to any mainstream economist or commentator. They generally accept that the world of work involves an equitable exchange —“a fair day’s pay for fair day’s work”. If anything, we are told that workers are being “greedy” when they demand pay increases over and above what is considered “fair”. Such “selfish” pay demands risk the “health of the whole economy”, they claim.
But for Marx, this ideology of “free and fair exchange” masks the exploitation built into the capitalist system. It hides the exploitation that goes on every day in a society where a tiny minority of people make vast profits out of the work done by the majority.
So how did Marx arrive at such a radical view? Capitalism was just developing when Marx was writing, but already he could see how different it was from previous societies.
For most of human history people had worked primarily for their own consumption. They produced things that met their needs directly, whether it was food grown on their land or clothes they made at home.
In contrast, capitalism is all about commodity production —things are produced not for immediate use but as commodities to be sold on the market.
Commodities do have to be of some use eventually, but they have to be exchanged for money before the producers can get any benefit from their efforts. Therefore all commodities have what Marx called an “exchange value”. Their price reflects this exchange value.
But how is this exchange value determined? Marx argued that the one thing all the very different commodities bought and sold under capitalism have in common is that they are products of human labour. It is this that provides the basis for exchange.
In previous societies, before money was universally used, people would swap or barter items with one another. How much or how little was exchanged would generally depend on how long people had taken to make the items.
Two people would only swap items if they felt it had taken roughly the same amount of time for each to make their items —otherwise it would not seem like a fair deal. It was not just an exchange of things that had taken place but an exchange of the labour time of the people involved.
The method of barter is obviously very time consuming and inefficient. As commodity production increased, the use of money became more important as a way of equating different products.
Previously one table may have been swapped for two chairs based on the amount of labour time used. Now one table may equal $10, and therefore one chair would equal $5.
The price charged still reflects the amount of labour time gone into making the product, but the use of money—since it can be exchanged for any commodity—cuts out the need for direct exchange between producers.
Money allows us to equate things that seem to have nothing in common, in terms of materials, how they have been made or their actual use.
Because of this money appears to be the goal of production under capitalism. Acquiring it often feels like our own personal goal, since it will enable us to buy the things for a better life. Therefore it can seem like money is the source of value.
But money only has value to the extent that it gives you a claim on the labour of others. If you had stacks of money, but nothing was being produced, then it would be no use.
It is the common element of human labour that allows us to measure how much a particular commodity should be sold for on the market. And it is this that Marx argued determines their value. The price of a commodity reflects the labour time needed to produce it.
So far it still seems as if everyone is on a more or less equal footing. But if all commodities are exchanged according to amount of labour needed to produce them, where does profit come from?
The answer lies in the relationship between the capitalist and wage labour. Under capitalism, our ability to work—Marx called this our “labour power”—is also a commodity to be bought and sold like everything else.
This is not a secret. We talk of “joining the labour market” after finishing education. We try to make ourselves more “marketable” to employers.
Workers sell their ability to labour (their labour power) to a particular employer or capitalist for an agreed price (our wage).
Our labour power is extremely useful to the capitalist since it is able to create all sorts of products. But how is its exchange value ultimately determined?
The price of labour power is determined just like that of any other commodity. It depends on the amount of labour required to produce it.
Now behind the term labour power lies a human being, although the capitalists often like to forget this. So workers get paid enough money to keep them going. You get enough money for food, the cost of your rent or mortgage, clothing and enough rest time to enable you to arrive at work each morning able to put in the required amount of effort and attention.
So what determines wages is the cost of living in a society. You go to work where you create products for the capitalist. In return you get money—your wage —with which you buy the different products you need to live, products that have themselves been created by other people’s labour.
This still seems quite fair, since you get paid the amount needed to cover your cost of living. But there is a difference between the amount you are paid for your labour power and the value that your labour creates when you work. For example, it may only take four hours of society’s total labour to produce the things you and your family require. So by lunchtime, you have covered your wage and by rights you should go home. But you do not stop work then. You go back to work in the afternoon and perhaps do an eight hour day. If four hours of your labour has created enough value to pay your wage, then the capitalist takes the next four hours of work from you for nothing.
In this example the capitalist is able to pocket a “surplus” of four labour hours a day from each worker. This is what Marx called “surplus value”, which is the source of profit.
Your labour creates more value than the value of your labour power. So exploitation is not an anomaly under capitalism —it is part of the normal workings of the system.
But there is another side to exploitation. The problem for capitalists is that when they buy labour power, what they get are people who can think and act for themselves.
Most people do not go into work thinking their wages should just cover the minimum required to enable them to keep on working another day. Instead we look at the tremendous wealth in society and think—rightly—that we are entitled to a better standard of living. So there is a continual struggle over the cost of labour power. Battles over pay break out regularly, especially at times when the real cost of living is going up.
If exploitation is crucial to capitalism, the logical conclusion is that an end to exploitation would require an end to capitalism. All the day to day battles over pay and conditions represent more limited battles against exploitation.
If we win some of these battles, it gives workers the confidence and strength to win more. It also helps us to win the battle of ideas to convince people that we have to get rid of the whole system.
Marx’s labour theory of value identifies labour as the source of value. It exposes how capitalists steal part of the value that our labour produces.
But this theory is not just a commentary on the system we live under. It is a weapon for workers who want to fight to get rid of the system of capitalism —and end exploitation forever.