III.

We have seen before that the value of a commodity is determined by the amount of labor which society will necessarily have to expend for its reproduction. This applies to all commodities, including that peculiar commodity upon which the whole capitalist system rests— labor power. All the mystery surrounding the production and distribution of the capitalist system, which we have noted above is due to the presence of this peculiar commodity which was absolutely unknown to any former system of society. In no social system before the advent of capitalism was human labor power an independent commodity which could be trafficked in on the market. A man's labor-power was deemed such an intimately personal attribute that it could not be considered apart from the man himself. The man himself might be free or unfree. If he was free his labor power was his own, used by himself for himself. If he was unfree, he, including his labor-power and his other personal attributes, belonged to his master. But in either case his labor power was inseparable from his body, was part and parcel of his personality as much as his personal appearance, and went with it.

It was only with the advent of capitalism that a man's labor power became separated from his body and person, when his labor power was “abstracted” from his personality and gained an independent existence. Then human labor power “as such,” human labor power in the abstract, human labor power unidentified by an individual characteristic and severed from any personal relation, became an independent commodity to be trafficked in on the open market. It is the appearance of this commodity historically that made capitalism possible, and it is due to its peculiar nature that so much mystery surrounds the workings of that system, upon which it has indelibly stamped its own characteristics.

The new commodity of abstract human labor, bought and sold on the open market, independent and irrespective of any individual or personal relation, is, at the same time, part and parcel of the commodities which constitute the stock-on-hand of the capitalist world as well as the source of all the other commodities on hand. It is also its own source and creator, being the means of its own reproduction. As the general source and creator of capitalistic commodities, this abstract human labor is the source, and therefore, the measure of the exchange value of those commodities. As its own source and reproducer it is its own source and measure of value. That is to say, the measure of the value of the capitalist commodity “general human labor power” is the amount of this labor power necessary for its reproduction under the social conditions of production existing at the time when it is dealt in on the market. This dual position of the commodity of general human labor power is what has mystified and baffled the investigators into the laws of production and distribution of wealth in capitalist society. When this dual position is properly understood the mystery vanishes, and the anatomy and physiology, as well as the psychology of capitalist society are revealed to the mind's eye, so that their construction and modus operandi can be studied in detail.

We have seen already that the value of a commodity is determined by the amount of labor which will necessarily have to be expended in its reproduction. This amount of labor will have to be bought in the open market by the producer in the shape of labor power, potential labor, and he will have to pay for it, barring accidents, its value. That is to say, he will have to pay the value of the labor necessary to produce this labor power, or, in other words, he will have to pay, in the form of wages, the amount of goods which the laborer consumes while exerting his labor power. This amount will vary, of course, with the productivity of labor in general, and with the standard of living of the workingmen. But it will invariably be less than the amount of goods produced by the laborer in this exertion of his labor power. This is a prerequisite not only of capitalist production, but of any social form of production wherein a part only of the members of society are actively engaged in the work of production. In other words, in our capitalist system, when a man sells his labor power to another man for a certain number of hours every day in consideration of a certain wage, the amount of labor necessary in order to produce the product represented by his wage is always smaller than the total amount of labor which he sold to his employer. As general human labor can only be measured by the time during which the labor power was exerted, it is the same thing as saying that the time required to produce a man's wages is always shorter than the time for which he was hired by the payment of these wages.

The amount of labor spent in reproducing the product which goes to the laborer as his wages may be called “necessary labor,” for the reason that it is absolutely necessary in order to make further production or even existence itself on the same plane possible. The amount of labor, on the other hand, which the laborer puts in above the “necessary labor” we may call “surplus labor,” for the reason that it is an overplus or addition to the amount of “necessary labor” which the laborer has already put in. The product which is produced in the “necessary labor” time, may for the same reasons be called “necessary” product, and its value— “necessary” value; and the product produced in the “surplus labor” time, and its value— “surplus” product and value. In using the words “necessary” and “surplus” in characterizing the different parts of labor, product, or value, we do not intend to convey any meaning of praise or justification in the case of the one, nor of condemnation or derogation in the case of the other. We use them in their purely technical sense, with absolutely no “ethical” or “appreciative” significance.

This surplus value being constantly produced by the commodity labor power which the capitalists engaged in production constantly employ in their business, is the secret and mysterious source of all the wealth and revenue which fall to the share of those classes of capitalist society, which, without producing themselves, and without either by force or cunning appropriating to themselves what others produced, are still found in possession of quite a considerable share of the worldly goods of our society. Because of the peculiar faculty of the commodity labor power to produce a surplus-product representing surplus-value, the capitalist class is enabled to obtain a part of the annual product of society without taking it from the producers.

When, at the end of a day, week, month, or year, the manufacturer is in possession of the finished product, that product contains the “necessary” as well as the “surplus” value. In the “necessary” value is included not only the wages, paid to the workingmen but also the “capital” that went into the product, or rather, that part of capital which Marx calls “constant,” that is to say, raw material, machinery charges, etc. Of course, all these things at one time, when they were produced, represented “necessary” as well as “surplus” value; when they are used, however, in production, that part of the product which simply reproduces their value is “necessary” for the same reason that the part representing the wages is “necessary.” The “surplus” which he finds himself thus possessed of is therefore a clear surplus over and above all his expenditures and investment. It is pure revenue or profit. The amount of the surplus-value produced, and therefore of the revenue or profit derived by the manufacturer, depends, aside from the mere length of the working day, as already stated, on the state of the productivity of labor in general and the mode of living of the workingmen; that is to say, on the proportion of the “necessary” to the “surplus” in the labor performed by the laborer during the period of his employment. The length of the work day given, the productivity of labor and the mode of living of the workingmen affect this proportion in opposite directions: a higher mode of living increases the “necessary” part of the labor, and higher productivity its “surplus” part.

After the surplus value is produced by the laborer in the surplus time that he works, the fund from which the capitalist class as a class derives its revenue and “saves” its wealth is ready for its use, and it becomes merely a question of its distribution among the different members of the class. This distribution is no simple matter, as it is done for the most part without the participants meeting each other, often without their knowledge, and always without their consent. This distribution is accomplished by the laws governing capitalist production, and automatically. In so far, of course, as such distribution is according to rule, normal. There is always, however, the possibility of one capitalist getting the better of the other, and the individual capitalist invariably attempts to do so. Whether or not these attempts are successful makes, however, no difference in this connection, as was already shown at length above. It is the rule of capitalist society that we are concerned with. The problem that confronts us, therefore, is: how does part of the surplus value which, after its production by the workingmen, is in the possession of the manufacturer, find its way into the hands of the other members of the capitalist class?

As was already indicated above, all value, and therefore also surplus value, is not realized until the product which is the embodiment of the value reaches its ultimate destination, the consumer, who takes it out of the market, disregards its exchange-value and enjoys its use-value. Before it has reached this, its ultimate destination, a commodity, while possessing exchange value possesses it only potentially. Exchange value, not being something intrinsically inherent in the commodity, but expressing merely a social relation of production and distribution, may at any time before its final realization, when it ceases to be exchange value, be adversely affected by some social change. We have already seen that the exchange value of a thing is the amount of labor necessary for the reproduction, at the time when it is needed, that is to say, when it reaches the consumer. Before it has reached the consumer its exchange value is always liable to change. There is therefore really no telling what the surplus value contained in a commodity is until it has reached the consumer. It cannot reach the consumer, however, before it has gone through the process of circulation in which it is being bought and sold, that is, exchanged. In all these transactions its exchange value, as the same expresses itself in the price which it fetches, is estimated upon the basis of its exchange value when it finally reaches its economic goal.

In this process of circulation the surplus value contained in the product, as far as the persons interested in its division are concerned, is realized by piecemeal. Each party concerned in the production and circulation of the commodity until it fulfills its social mission gets his share of the surplus value therein contained when it leaves his hands, on a sale by him, and the purchase price which he receives represents the “necessary” part of the value of the commodity together with the share of the surplus value thereof to which he and those who preceded him in the process are entitled. In this way the surplus product contained in a commodity when it is produced is gradually converted into surplus value as it “circulates” along, and the surplus value is taken up gradually as it is being realized, share by share, along its course. The division of the surplus value takes place in the circulation process, and expresses itself in the different prices at which the commodity is sold at the different stages of this process.

These different prices at which a commodity is sold at different stages of the circulation process seemed to us inexplicable before, and vexed us not a little. But they will be readily understood when we know that the sharing up of the surplus value takes place in this process. As each stage of the process is passed a share of the surplus value is realized and is added to the price. When the exchange value of a commodity is first realized, when the manufacturer sells it, it is only that part of its exchange value that is realized and is expressed in the price which the manufacturer obtains for it, which represents the “necessary” value of the commodity and that part of its surplus value which the manufacturer receives as his profit. The merchant pays his price to the manufacturer and enters into the transaction because the full surplus value contained in the commodity has not yet been realized and he expects to realize a further share thereof for his own benefit upon a re-sale of the commodity to the retailer or consumer. This does actually happen in the usual course of business. This operation is repeated until the commodity passes the necessary stages of its circulation and reaches its social destination— the consumer— when the full surplus value contained in the commodity is realized in the purchase price paid by the consumer. This price represents the full value of the commodity, “necessary” as well as “surplus.”

The rules in accordance with which the different “interests” share in the surplus-value, and in accordance with which the different prices are paid for the commodity at the successive stages of the circulation process are themselves the result of the peculiar commodity of the capitalist system, stamped upon it by the peculiar commodity which lies at its foundation— labor power. The profit-sharing of the capitalist class is therefore absolutely impersonal. It also requires absolute freedom of movement for the different elements which go into the process of production and distribution. Wherever there is no absolute freedom of movement the laws governing the division of the surplus-value among the different capitalists are interfered with arbitrarily and may even be abrogated. This is a necessary corollary to the observation already made that all the laws of value and consequently the production and realization of the surplus-value require absolute freedom of movement.

The presence in the market of the laborer offering for sale his labor power presupposes the presence in the same market of the capitalist seeking employment for his capital. Labor power as a commodity presupposes that the laborer who has this power for sale is not in possession of the tools of production necessary in order to exercise this power in the process of production. It presupposes a high state of technical development of production; such a state of development that the productivity of labor is considerably above that stage where it can merely reproduce itself; it must yield a surplus-value, and a portion of the surplus value must have been “saved” for the purpose of being used as a means of future production. It also presupposes that the “saved” portions of the surplus-value produced in the past are not in the hands of the laborers who offer for sale their labor-power. The possessors of these “saved” portions of past surplus-values, the capitalists, use these “savings,” capital, in the production of further surplus-value, by the aid of the labor power which they purchase for part of it, in order to take it all for themselves. It is not, however, the capitalist personally who acquires the surplus-value. Capital, congealed and concentrated surplus-profit, produced by labor power, is just as impersonal, just as abstract, as its parent, labor power. It is capital as such, irrespective of the capitalist who owns it, that gobbles up all the surplus-value. The capitalist personally may sometimes by his ingenuity cause his capital to produce some extra surplus-value which other, less ingenious, capitalists could not do. In that event it goes to him personally as an extra profit. The ordinary, regular profits, however, of capitalist production and trade go to the credit of the capital employed, not the capitalist personally.

In order to produce a certain commodity and realize its value, that is bring it to the ultimate consumer and obtain from him its price, a certain amount of capital must necessarily be employed for a certain length of time. The amount of capital necessary to be employed therein at the different stages of the processes of production and circulation, and the length of time for which it will have to be employed at each stage will vary, of course, with the state of development of the means of production and exchange, including the means of transportation and communication and other facilities for the circulation of commodities. But under given conditions of production and circulation the amounts of, and lengths of time for which, capital is necessarily employed in order to produce a commodity and bring it to the consumer remain the same.

We have already seen before that while all the surplus-value contained in a commodity is produced in the process of the commodity's production while it is in the possession of the manufacturer, this surplus-value is divided among all the capitalists who are concerned in the production and circulation of the commodity, while the same remains in the circulation process. Strictly speaking, however, as has been already observed, the surplus-value is not divided among the different capitalists concerned in the production and circulation of the commodity, but among the different capitals employed in these two processes through which the life-course of each commodity runs. The distributive share of each of these capitals in the surplus-value is proportionate to its own size and the length of time it was necessarily employed in either the production or the circulation of the commodity. That is to say, the total amount of capital, measured by a given unit, say a dollar, employed during all the time, measured by a given unit, say a day, that the commodity was necessarily in the process of production and circulation, is footed up, and the amount of surplus-value contained in the commodity is divided by that total, giving a certain amount of surplus-value per unit of capital per unit of time, which we will call the rate of profit. The distributive share of each capital is, then, the product of its own size multiplied by the time it was employed multiplied by the rate of profit.[b]

When the manufacturer sells the commodity, at its first appearance as a commodity and the first realization of its value, the price which he receives and in which the value is realized, is not its final price expressing its actual value when it is ready to perform its full social function in the hands of the consumer. It is merely an intermediate price; Marx calls it “Price of Production.” This intermediary price is based on the ultimate price of the commodity to be received from the consumer in accordance with its value. It is by this expected ultimate price representing its full value that the amount of surplus-value contained in it is ascertained. When the surplus-value of the commodity is given, the Price of Production is determined by the “necessary” value contained in it plus the distributive share of the manufacturer's capital in the surplus-value. The “necessary” value contained in the commodity represents the cost of its production to the manufacturer. That does not mean, however, that the manufacturer simply gets a return of what he has expended in the production of the commodity. It is not the actual expense of production that is represented in its “necessary” value, but the socially necessary expense of producing the commodity at the time the manufacturer sells it. If the actual cost of production is above that the manufacturer loses the difference; if it is below he pockets the difference as an extra profit.

The prices paid at any succeeding stage of the circulating process are fixed in the same way. Each succeeding seller gets in the price which he receives the necessary value of the commodity plus the distributive share of the surplus-value to which he and his predecessors in the process are entitled in accordance with the rules formulated above. Each of them gets his own distributive share of the surplus-value in addition to what he has paid or laid out. Provided, of course, he bought and sold at its fair price. Otherwise, one of them may get more than his due share and another less. But all of the capitalists concerned, together, get all the surplus-value produced in the process of production, and no more. Unless, indeed, the workingmen did not get their fair pay or the consumer was compelled to pay an unfair price, in which event the capitalists immediately concerned reaped an extra profit. Or the workingmen were paid too much or the consumer paid too little, in which event the capitalists immediately concerned suffered a loss.

It was assumed all through this discussion that each capitalist worked with his own capital. If any one of them did not, he had to give up all or part of his share of the surplus-value, which he received in the form of profit, to the person from whom he borrowed his capital, in the shape of interest. This does not change the matter, however, and we are not concerned with it here. We also left out of the discussion the question of rent, and the question of additional work which may have to be performed on the commodity in the circulation process, as these questions in no wise affect the subject-matter of our investigation— the laws governing the production of wealth in the capitalist system and the manner of its distribution among the different classes of capitalist society.