It took some centuries for the capitalists to build up their monopoly control over the means of production. In this country, for instance, the parliaments of the 17th and 18th centuries had first to pass a succession of Enclosure Acts, which drove peasants away from their own means of production, the land which they had cultivated for centuries. The land became the property of a section of the capitalist class and the mass of the rural population were forced to sell their labour to capitalists or starve.
Once capitalism had achieved this monopoly of the means of production, it could afford to let the mass of the population enjoy apparent freedom and equality of political rights with the capitalists. For however `free' the workers were, they still had to work for a living.
Pro-capitalist economists have a simple explanation of what then happens. They say that by paying wages the capitalist buys the labour of the worker. He must pay a fair price for it. Otherwise the worker will go and work for someone else. The capitalist gives a `fair day's wage'. In return the worker should give a `fair day's work'.
How then do they explain profit? This, they claim, is a `reward' to the capitalist for his `sacrifice' in allowing the means of production (his capital) to be put to use. It is an argument that can hardly convince any worker who gives it a moment's thought.
Take a company that announces a `net rate of profit' of 10 percent. It is saying that if the cost of all the machinery, factories and so on that it owns is ?100 million, then it is left with ?10 million profit after paying the wages, raw material costs and the cost of replacing the machinery that wears out in a year.
You don't have to be a genius to see that after ten years the company will have made a total profit of ?100 million - the full cost of its original investment.
If it is `sacrifice' that is being rewarded, then surely after the first ten years all profits should cease. For by then the capitalists have been paid back completely for the money they put in in the first place. In fact, however, the capitalist is twice as wealthy as before. He owns his original investment and the accumulated profits.
The workers, in the meantime, have sacrificed most of their life's energy to working eight hours a day, 48 weeks a year, in the factory. Are they twice as well off at the end of that time as at the beginning? You bet your boots they're not. Even if a worker saves assiduously, he or she won't be able to buy much more than a colour television set, a cheap central heating system or a second hand car. The worker will never raise the money to buy the factory he or she works in.
The `fair day's work for a fair day's pay' has multiplied the capital of the capitalist, while leaving the worker with no capital and no choice but to go on working for roughly the same wage. The `equal rights' of the capitalist and the worker have increased inequality.
One of Karl Marx's great discoveries was the explanation for this apparent anomaly. There is no mechanism that forces a capitalist to pay his workers the full value of the work they do. A worker employed, for example, in the engineering industry today might create ?400 of new output a week. But that does not mean he or she will be paid this sum. In 99 cases out of 100, they will get paid considerably less.
The alternative they have to working is to go hungry (or live on the miserable sums handed out by the social security). So they demand not the full value of what they produce, but rather just enough to give them a more or less acceptable living standard. The worker is paid only enough to get him to put all his efforts, all his capacity for work (what Marx called his labour power) at the disposal of the capitalist each day.
From the capitalist's point of view, providing the workers are paid enough to keep them fit for work and to bring up their children as a new generation of workers, then they are being paid a fair amount for their labour power. But the amount of wealth needed to keep workers fit for work is considerably less than the amount of wealth they can produce once working - the value of their labour power is considerably less than the value created by their labour.
The difference goes into the pocket of the capitalist. Marx called it `surplus value'.
The self expansion of capital
If you read the writing of apologists for the present system, you will soon notice that they share a strange belief. Money, according to them, has a magical property. It can grow like a plant or animal.
When a capitalist puts his money in a bank he expects it to increase in amount. When he invests it in the shares of ICI or Unilever he expects to be rewarded by offshoots of fresh money every year, in the form of dividend payments. Kari Marx noted this phenomenon, which he called the `self expansion of capital', and set out to explain it. As we saw previously, his explanation began not with money, but with labour and the means of production. In present society, those with enough wealth can buy control of the means of production. They can then force everyone else to sell to them the labour needed to work the means of production. The secret of the `self expansion of capital', of the miraculous capacity of money to grow for those who have plenty of it, lies in the buying and selling of this labour.
Let's take the example of a worker, who we'll call Jack, who gets a job with an employer. Sir Browning Browne. The work Jack can do in eight hours will create an additional amount of wealth - worth perhaps ?48. But Jack will be willing to work for much less than this, since the alternative is social security. The efforts of pro-capitalist MPs, such as the obnoxious Tory Peter Lilley, ensure that he will only get ?12 a day on social security to keep himself and his family. They explain that to give more would be to `destroy the incentive to work'.
If Jack wants to get more than ?12 a day he has to sell his ability to work, his labour power, even if he is offered much less than the ?48 worth of wealth he can create in eight hours. He will be willing to work for, perhaps, the average wage, ?28 a day. The difference, ?20 a day, goes into the pocket of Sir Browning. It is Sir Browning's surplus value.
Because he had enough wealth to buy control of the means of production in the first place, Sir Browning Browne can guarantee growing richer by ?20 a day for every worker he employs. His money keeps growing, his capital expanding, not because of some law of nature, but because his control of the means of production allows him to get someone else's labour on the cheap.
Of course, Sir Browning does not necessarily have all the ?20 to himself - he may rent the factory or the land, he may have borrowed some of his initial wealth from other members of the ruling class. They demand in return a cut of the surplus value. So perhaps he forks out ?10 to them as rent, interest and dividend payments, leaving himself with only ?10 profit.
Those who live off dividends have probably never seen Jack in their lives. Nevertheless, it was not the mystical power of pound coins that gave them their income, but the all too physical sweat of Jack. The dividend, the interest payments and the profit all came out of the surplus value.
What decides how much Jack gets for his work? The employer will try to pay as little as possible. But in practice there are limits below which he cannot go. Some of these limits are physical - it is no good giving workers such miserable wages that they suffer from malnutrition and are unable to put any effort into their work. They also have to be able to travel to and from work, to have somewhere they can rest at night, so that they do not fall asleep over the machines.
From this point of view it is worth even paying for what the workers think of as `little luxuries' - like a few pints in the evening, the television, the occasional holiday. These all make the worker more refreshed and capable of doing more work. They all serve to replenish his labour power. It is an important fact that where wages are `held too low' the productivity of labour falls.
The capitalist has to worry about something else as well. His firm will be in business for many years, long after the present set of workers have died out. The firm will require the labour of their children. So they have to pay the workers enough to bring up their children. They also have to ensure that the state provides these children with certain skills (such as reading and writing) through the educational system.
In practice, something else matters as well - what the worker thinks is a `decent wage'. A worker who gets paid considerably less than this may well neglect his work, not worrying about losing his job since he thinks it is `useless'.
All these elements that determine his wage have one thing in common. They all go towards making sure he has the life energy, the labour power, that the capitalist buys by the hour. The workers are paid the cost of keeping themselves and their families alive and fit for work.
In present capitalist society, one further point has to be noted. Huge amounts of wealth are spent on such things as police forces and weapons. These are used in the interests of the capitalist class by the state. In effect, they belong to the capitalist class, although they are run by the state. The value which is spent on them belongs to the capitalists, not the workers. It too is part of the surplus value.
Surplus value = profit + rent + interest + spending on the police, army and so on.
5. The labour theory of value
But machinery, capital, produces goods as well as labour. If so, it's only fair that capital as well as labour gets a share of the wealth produced. Every `factor of production' has to get its reward.
That is how someone who has been taught a little pro-capitalist economics replies to the Marxist analysis of exploitation and surplus value. And at first sight the objection seems to make some sense. For, surely, you cannot produce goods without capital?
Marxists have never argued that you could. But our starting point is rather different. We begin by asking: where does capital come from? How did the means of production come into existence in the first place?
The answer is not difficult to find. Everything people have used historically to create wealth - whether a Neolithic stone axe or a modern computer - once had to be made by human labour. Even if the axe was shaped with tools, the tools in turn were the product of previous labour.
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