Value of Labor - The value of labor is determined by the amount of labor time necessary to produce and thus reproduce labor. It can be reduced to the value of a certain amount of means of subsistence.

Residual value - the balance created by the excess of the value of the product over the value of the consumed product-forming factors, i.e., the means of production and labor.

Constant capital - that part of capital that is transformed into the means of production, i.e., raw materials, auxiliary materials, and means of labor, and does not change its value in the process of production, which Marx referred to as the constant part of capital, or in short, constant capital.

Variable capital - the part of capital that is transformed into labor and changes its own amount of value in the process of production, this part of capital is constantly being transformed from invariant to variable, Marx called it the variable capital part, or variable capital for short.

Rate of Residual Value - the relative amount of surplus value, i.e., the rate at which the value of variable capital increases. It is determined by the ratio of surplus value to variable capital. Marx called this relative amount of value accretion or surplus value of variable capital the rate of surplus value.

Necessary Labor Time and Necessary Labor - Compensating the value of variable capital with newly created value, that is, reproducing the value of labor, Marx called the portion of the working day in which this reproduction takes place necessary labor time, and the labor expended during this portion of time necessary labor.

Residual labor time and surplus labor - the time during which a worker works beyond the boundaries of necessary labor and does not form any value for the worker - forms surplus value, and Marx called this part of the working day residual labor time, and the labor expended during this time residual labor. Surplus labor is not a phenomenon peculiar to capitalism, but it is only in the capitalist mode of production that surplus labor manifests itself as surplus value.

Residual product - that part of the product which represents surplus value is called surplus product.

Absolute surplus value - The surplus value produced by extending the working day is called absolute surplus value.

Relative surplus value - The surplus value produced by shortening the necessary labor time and changing the ratio of the quantities of the two components of the working day accordingly is called relative surplus value.

I. Production of Surplus Value

There are a lot of rich people in this world, and some of them are simply unimaginably rich. At the same time, there are a much larger number of poor people. In China, for example, the Gini coefficient published by the National Bureau of Statistics and some research institutes has long exceeded the internationally accepted warning level of 0.4. The gap between the rich and the poor has been widening rapidly in most of the world's countries over the past decade or so, and the 2016 Global Wealth Report released by Credit Suisse Research Institute in 2016 shows that the richest 10% of the world's population controls 86% of global wealth; while about 73% of the world's population controls about 50% of global wealth. wealth; while about 73% of the world's population at the bottom owns only 2.4% of global wealth. According to India's official statistics, a quarter of Indians, about 250 million, live on less than one dollar a day. According to the "2010 Wealth Report" published by Citi Private Bank in March 2010, the number of millionaires in China in 2009 ranked fourth in the world; in June of the same year, a study by the U.S.-based Boston Consulting Group also pointed out that the number of millionaires in China increased by 31% in 2009 to rank fourth among all countries in the world. 2016, the number of millionaires with net assets of more than 50 million U.S. dollars has been ranked second in the world by China. ranked second in the world.

If you look at those rich people, you will find that they get rich in different ways, there are by doing business, there are mines, there are speculation in real estate and land, there are patents, there are securities investment, and so on, and of course there is also corruption, but there is absolutely no one who relies on a salary.

And so it comes to the old question, why is the income of capital higher than the income of labor? In this chapter we shall not consider the income from land rent and so on. Here we will consider only capital and labor.

There are many economic arguments about the income of capitalists, and economists have racked their brains to justify the high income of capitalists. There is a very old argument that says that a capitalist's income is actually a wage, which is what the capitalist gets for his labor in managing the business. This argument seems to make sense, and usually capitalists work very hard to keep their businesses running. However, Adam Smith had already pointed out the incorrectness of this argument: there is no difference between the labor spent on managing two million assets and managing one million assets, but the income of the former is usually twice as much as that of the latter. In other words, the capitalist's income is proportional to the amount of capital he owns or manages, and has little to do with the amount of labor he expends. Moreover, if the capitalist's income is the income of labor in managing the business, then this wage is too high and is totally disproportionate to the normal income from labor.

The second argument is that the capitalist receives an income because he does not squander or consume his capital, but uses it for production; and he should be compensated for this. This argument is also untenable. As Marx said, what the capitalist gets for doing so is not regret, but commodities. He also said that the theory of abstinence is "a substitution of flattering words for the categories of economics". There is no reason to think that the capitalist will be so rewarded for "abstinence", and income is never automatically generated simply by "abstinence". Many ordinary people who have scrimped and saved all their lives have not been rewarded for their "abstinence". Moreover, capitalists do not always "economize"; they also spend lavishly. For example, China has become the world's second largest consumer of luxury goods, every year to buy a lot of expensive sports cars, yachts, watches, jewelry, high-end clothing and so on.

The third argument is that the capitalist is the one who takes the risk, and he gets paid to compensate for the risk he takes. However, the laborer usually works for the boss before he gets paid, and also takes the risk of not getting paid, and it is true that many people do not get paid as a result. Even in good times, it is common for migrant workers to be owed back pay and it has been a major component of labor disputes. So why are laborers not being compensated? The capitalist is not particularly risk-averse. He is willing to take risks mostly because he sees the hope of making a profit. A capitalist does not make profits by taking risks; he takes risks in pursuit of profits. It's just that some capitalists have a greater appetite for risk and some have a smaller one. It's like gambling: a gambler takes a huge risk of losing all his money to gamble, of course, because he believes he can make a lot of money.

Moreover, risk itself does not create any wealth; in economics, risk is just uncertainty. In investment science, the arithmetic mean of the distribution of the various possible returns (including losses) on an investment is called expected income, and the standard deviation of the distribution is called risk. Obviously, no matter how much risk is taken, the final average income is unaffected. And whether the actual income is higher or lower than the average income is entirely a matter of chance.

According to the microeconomics theory of value, there are four factors of production, labor, capital, land, and entrepreneurial talent, which each contribute to the production of goods and thus earn their respective incomes: wages, interest, land rent, and profits. This argument seems to make sense, but in reality it is untenable. It is not the factors of production that earn the income, but the owners of the factors of production; the factors of production always exist, but the way they are appropriated is different. And according to the calculations of some economists, if the other factors of production are not taken into account, capital contributes one quarter of the production function, and labor contributes three quarters. In reality labor gets a far smaller share. For example, in our GDP, labor compensation (which also includes compensation paid to the bourgeoisie) accounts for only about 40% of all income. If you calculate it on the basis of full social value (GDP is the value-added part), then labor compensation is only 16.5% (China Input-Output Table 2012).

The real process of capitalist production is that society splits into two opposing classes, one class has no other means of earning a living than its own

labor. This class is free, in Marx's words "free of everything", and becomes the working class that sells its labor for a living. The other class holds the means of production and is called the bourgeoisie. The separation of labor from the means of production was historically achieved through violence, a process Marx called the "primitive accumulation of capital," most notably the Enclosure Movement in England. The reason why Marx called it "primitive accumulation of capital" is that "this accumulation is not the result of the capitalist mode of production, but its starting point." At the same time, Marx pointed out that violence against the poor plays a major role in the process of "primitive accumulation". Nowadays, some people emphasize that "primitive accumulation" liberates the productive forces and is a social progress, but in fact, they are only using this kind of slogan to justify the violence in the process of "primitive accumulation". Marx did not say that the consequences of "primitive accumulation" are not progress, but Marx only pointed out that the legend of the so-called bourgeoisie's industriousness to wealth is untrue.

The working class, also known as the proletariat, is actually the proletarian class. The appellation proletarian comes from ancient Rome and refers to a low social class in ancient Rome, which had no property and lived on social assistance, but they were free men. In the 19th century, it was often used to describe the workers of the time, because workers were also free men, and similarly had no property. The difference is that, as the French economist Sismondi once pointed out, the ancient proletariat lived off society, while modern society lives off the proletariat.

Workers and capitalists meet in the labor market, negotiate certain terms, and the workers are hired by the capitalists, who pay the workers wages. Marx said that in the market for the purchase and sale of labor, "what reigns is only freedom, equality, ownership, and sidelinquency. Freedom! For buyers and sellers of commodities, such as labor, depend only on their own free will. They enter into contracts as free and legally equal persons. The contract is the final result of the legal manifestation by which their wills are ****ing equal. Equality! Because they relate to each other only as possessors of goods, exchanging equals for equals. Ownership! Because each has dominion only over what is his own. Bianchi! Because both parties care only for themselves."

Bianchin was an English philosopher and one of the representatives of utilitarian philosophy. The theory of utility in economics has some theoretical connection with him. Marx had a low opinion of him, calling him "the originator of mediocrity", "the bourgeois mediocrity of the nineteenth century, the drumbeat of rationality, tedious, pedantic, boastful saintly philosophers", "a genius among the bourgeois fools. ". After the capitalist and the worker have made their deal on the trading market, they come to the factory and begin the process of consuming labor, that is, the process of commodity production. As we described in Chapter 2, the value of a commodity depends on the amount of socially necessary labor time expended in producing that commodity. In the production process of capitalist commodities, through labor, raw materials are made into new commodities, and the value of the raw materials is transferred into the new commodities. The value of the tools for labor, the machines used, and the equipment, plant, etc., is transferred partly and partly by depreciation to the new commodities, because they have a long life and are not consumed all at once. In addition, there is the new addition of labor. The labor of the workers forms part of the value of the new commodity, so that the total value of the new commodity is higher than the total value of the raw materials, tools of labor, etc., and this is the source of the capitalist's profit.

But not all of the newly created value belongs to the capitalist. Some of the newly generated value is used to pay for the value of labor. The capitalist buys labor power, a commodity whose value, in quantity, is equal to the value of the commodity needed to produce and reproduce it. The value of labor power is less than the newly created value of the labor process that uses it. If the value of the labor force is higher than the value created by using it, it is a money-losing business, and no one would do such a business.

So, the value newly created by labor in the production process is divided into two parts: one part is used to pay for the value of the labor force, which is expressed as wages; and the remaining part is what Marx called surplus value. Various incomes such as profit, ground rent, interest, etc. are derived from surplus value.

The concept of surplus value is very important, and it was Marx's most important economic discovery. Before Marx, economists were always confused by the various specific manifestations of surplus value, such as interest, profit, ground rent, etc., and so were always in a state of confusion while explaining various incomes. Marx pointed out that interest, profit and ground rent all derive from surplus value, so it is necessary to study the laws of surplus value first, and then the laws of interest, profit and ground rent can be correctly explained.

Of the capitalist's total capital, the portion used to pay for the means of production of raw materials, auxiliary materials, means of labor, and so on, is called constant capital by Marx because this portion of the capital does not change its amount of value in the process of production. The portion of capital used to purchase labor, because labor creates new value, this portion of capital brings in a new amount of value in the process of production, which Marx called variable capital. Marx says, "These two components of capital are distinguished, from the point of view of the labor process, as objective and subjective factors, as means of production and labor power, and, from the point of view of the process of value-augmentation, as constant and variable capital." In other words, the division between constant and variable capital is made from the point of view of value multiplication, and by the different roles played by capital in the multiplication of value. The division between constant and variable capital was made by Marx, and before Marx, economists only distinguished between fixed and working capital. The division between constant and variable capital scientifically explains where surplus value comes from and is decisive for the theory of the formation of the average rate of profit. As for the distinction between fixed and working capital, which will be discussed in later chapters, this distinction has important implications for the understanding of economic cycles.

Second, the rate of surplus value

Because workers sell their labor and receive only the value of their labor, it is clear that they will not get rich and wealthy by relying on wages. Under different social conditions, the level of wages will vary. The survival of workers in developed countries is not as miserable now as it was in the 19th century. But even so, workers in the developed countries can only guarantee themselves a decent life. In the event of an economic crisis, their lives will still be seriously affected. For example, in the subprime mortgage financial crisis, the unemployment rate in the United States was as high as 10.2% in October 2009, and in 2011 it was still hovering around 10%. A large number of Americans have lost their homes and are still saddled with heavy credit card debts. In developing countries, workers' living standards are still quite low. For example, in 2015, the average monthly wage of those employed in urban units in China was only 5,170 yuan, while those employed in private urban units were only 3,299 yuan. Although there are some high-paying jobs, they account for a small proportion of the total employment, and the requirements for practitioners are very high. As soon as there is an economic downturn, there are a lot of people playing on the idea of residents' savings, saying that the Chinese people are saving too much and should spend more. As long as Chinese people consume more, they can boost domestic demand and economic growth. However, Zhou Xiaochuan, governor of the People's Bank of China, has said that Chinese residents' savings are actually relatively stable, and that China's savings have increased faster in recent years, mainly because of the increase in corporate savings. National Bureau of Statistics in December 2008, zhejiang investigation team in the release of the "zhejiang residents income gap on the impact of empirical analysis of consumer demand", simply said, "in recent years, zhejiang residents income gap continues to expand, is caused by the lack of consumer demand for residents of an important reason." "Important reason" is actually an official euphemism, it should actually be "the main reason". In fact, even in economically developed areas, the income of ordinary workers is not high. We will come back to this point in Chapter 24.

Marx used the letter c for the value of constant capital, v for the value of variable capital, and m for surplus value. m/v, the ratio of the amount of surplus value to the amount of variable capital, is called the rate of surplus value. Of a worker's daily labor, the portion of labor time used to produce his wages is called necessary labor time by Marx; the labor time used to produce surplus value is called surplus labor time by Marx. Because value is labor time, the rate of surplus value is also equal to surplus labor/necessary labor. Surplus labor has always existed, and the rent that peasants give to their landlords is also surplus labor, but only in the capitalist mode of production does surplus labor become surplus value. Under the capitalist system, the rate of surplus value reflects the degree of social affluence. The higher the rate of surplus value, the more surplus labor or surplus product there is, and thus the richer the person who possesses the surplus value. Marx said, "The degree of richness is not calculated by the absolute amount of product, but by the relative amount of surplus product." The rapid widening of the gap between rich and poor in modern society reflects the increase in the rate of surplus value.

The rate of surplus value fundamentally reflects the degree of exploitation by capitalists. What are the respective proportions of wages and surplus value to new value? This is really a difficult question to answer because in a capitalist society, people try to avoid topics related to exploitation, so there is a lack of statistics on this. However, we can make a rough estimate with the help of some data. According to the 2012 Chinese Input-Output Table, if the value of total output is 100%, then material inputs account for 66.5% of it, and the value added is 33.5%; of this 33.5%, the portion used to compensate employees is 16.5%, and the remaining 17% forms profits, taxes, depreciation, and so on. This means that the rate of surplus value is 103% (17%/16.5%). If you calculate the percentage of surplus value in relation to constant and variable capital, it is only 20.5% (17%/83%), which is the rate of profit. In later chapters, we will describe the relationship between the rate of surplus value and the rate of profit.

One thing to note here is that the rate of surplus value is not necessarily the same in different industries. In this 2012 input-output table, the rate of surplus value in different economic sectors ranges from 14.9% to 2024%. This is because different industries have different production conditions, different labor intensity, and different capital structures.

III. Absolute and Relative Surplus Value

When Marx analyzed surplus value, he put forward the concepts of absolute and relative surplus value. The so-called absolute surplus value is to increase the amount of surplus value by lengthening the working hours of workers on the premise that their wages remain unchanged. In 19th century Britain, the longest working hours of workers used to reach 20 hours a day, so much so that the London Daily Telegraph of January 17, 1860 reported, "How would we feel if a city should go so far as to hold a public meeting to plead for the limitation of men's labor to 18 hours a day!" Beginning with the Ten Hour Work Act in England in 1850, a series of labor legislation began to be published in various countries to limit the workday. It was only after a long struggle by the working class in Europe and America that the eight-hour working day now prevails. After the founding of the Soviet Union, the seven-hour working day was introduced in the 1920s and later in France. However, the 7-hour workday in France exists in name only now. The Japanese government has implemented a training system since the 1980s for people from developing countries to learn skills, but in recent years there have been many cases of Chinese trainees accusing their employers of exploiting them. A survey by Japan's International Training Cooperation Organization (ITCO) showed that the death rate of foreign trainees in Japan due to brain and heart diseases is double that of Japanese of the same age, and on June 22, 2009, three Chinese trainees accompanied by a representative of the Lawyers' Liaison Association for Foreign Trainees (LLAF) of Japan accused the Japanese companies that hired them of exploiting their labor force. companies employing them accused them of labor exploitation. One of the trainees said that he had been forced to work 120 hours of overtime per month with a salary of less than 8,000 RMB, and that the company had arranged for him to live in a shipping container. The company also fired him suddenly at the end of last year. Another trainee said he was told he would be working as a carpenter in Japan, but in fact he was working as an asbestos remover, which is very harmful to health.

The eight-hour workday in China is actually 8:30am to 5:30pm or 9am to 6pm in many organizations, which is actually nine hours. Lunch and breaks are supposed to be included in the 8-hour workday. We also know that, especially in factories employing a large number of migrant workers, the working hours of workers are particularly long and the working environment is particularly harsh. In some "sweatshops", it is very common to work more than 10 hours a day. According to the 2009 Rural Migrant Worker Monitoring and Survey Report published by the Rural Department of the National Bureau of Statistics, in 2009, migrant workers employed outside the country worked an average of 26 days per month and 58.4 hours per week. This is roughly equivalent to one day of rest per week and an average of more than 9.7 hours of work per day. Of these, 89.8% worked more than the 44 hours per week stipulated in the Labor Law.The 2016 report of this testing survey shows that the situation has improved, with the average number of days worked per month by migrant workers outside the country being 24.9 days, and the average number of hours worked per day being 8.5 hours. However, the percentage of rural migrant workers who worked more than 8 hours a day was 64.4%, and the percentage of those who worked more than 44 hours a week was 78.4%, which was still very high.The longest average labor hours in 2009 were for rural migrant workers in the accommodation and catering industry, who worked more than 60 hours a week, and their average monthly income was only 1,264 yuan, which was the lowest income of the several major industries in which rural migrant workers were employed. There are no figures for this in the 2016 report.

Relative surplus value is the amount of surplus value that can be increased by shortening the necessary labor time and lengthening the surplus labor time by increasing the intensity of labor, improving the efficiency of work, and so on, provided that the working day remains unchanged. In chapter 3 on the division of labor, we have already mentioned how the division of labor and machines can be made more efficient. There is more to it than just increasing the division of labor and improving equipment. Take a recent example. In the wake of the financial crisis and the massive layoffs in the U.S., on June 4, 2009, the U.S. Department of Labor reported that productivity increased by 1.6% in the first quarter. This Labor Department report also mentioned that the number of hours worked by workers decreased by 9 percentage points, while at the same time output fell by only 7.6 percentage points. This suggests that although during the economic crisis, U.S. companies laid off too many workers, and those who were still employed had to complete more work. In fact, throughout 2009, U.S. labor productivity rose by 2.5 percent and hours worked fell by 5.1 percent. Not only did workers' incomes not rise in line with the rise in labor productivity, the cost of hiring in the U.S. saw a significant decline. So, as you can see, even in an economic crisis, capitalists still have a way to make a buck.

Fourth, class struggle

The newly generated value in the production process is split into two pieces, wages and surplus value, so it is clear that if the total amount remains the same, then whichever piece increases, the other piece decreases. It is for this reason that the fundamental interests of the working class and the bourgeoisie are opposed and irreconcilable. This is the economic basis of class struggle. Nowadays, when we talk about antagonism and struggle, some people get nervous. In fact, there are contradictions and struggles everywhere in the world. Class struggle is also very commonplace and not worth making a fuss about at all. Every one of us has at one time or another asked for a wage increase, for more benefits, for a better working environment. And our bosses have found ways not to increase or decrease wages, assign us more and more tasks and targets, videotape the workplace, sometimes record phone calls, restrict Internet access, and of course, ban office romances, etc. All of these, to put it bluntly, are manifestations of class struggle. The class struggle is sometimes of a blistering and violent nature, and can even develop into large-scale social violence, but in most cases, although not as violent, the class struggle still permeates everyday life, and is reflected in even the most common trivial matters, which are fundamentally the confrontation of interests between different classes.

This confrontation manifests itself in every way, economically, politically, and ideologically, and in April 2009 it was reported that the unemployment rate in France had surpassed 8 percent, the highest level in two years. In the first two months of 2009 alone, nearly 170,000 people lost their jobs. At the same time the French were outraged by continuing reports of huge bonuses for company executives and large severance packages for departing executives. As a result (of that reporting), in the weeks since, six companies across France have seen disgruntled workers detain company executives following layoffs. The executives are not being held in the Bastille, but in captivity in hotels of up to four stars. The kidnapping of the bosses was polite and an employee involved in the kidnapping said the situation was not that bad and the bosses were well fed. About a third of those polled supported the "kidnapping of the bosses" operation, while 65 percent understood it, according to pollsters IFOP. Only 7% of the French condemned the behavior. The kidnappings have been effective, and in the vast majority of cases companies have agreed to renegotiate workers' wages or to increase severance pay for dismissed employees. Such actions are even spreading to other countries. In Belgium, angry employees of Fiat Automobiles held three company executives captive in their offices on April 9, 2009, demanding a renegotiation of the terms of proposed layoffs.

In the United States, there were also factory occupations by workers, and later the powerful Occupy Wall Street movement. The movement swept across the United States and led to clashes between the police and the public in a number of cities.

There are some people who always want to erase class antagonisms and struggles. They insist that the interests of bosses and employees are aligned. In fact, I know not a few bosses, big and small, and not one of them thinks that way. Bosses are very frank, and they all think that they are the ones who feed their employees and that the employees are taking advantage of them. The first thing that comes to mind for most companies when they are trying to meet their cost compression targets is to freeze or even reduce their wage levels, or to reduce their payroll by laying off employees.

Because of the opposing interests, once there is a crisis, one side will find a way to shift the losses to the other side. This is a struggle in itself. The complex struggles between governments, capitalists and workers in the developed world over pensions and health insurance, deficit reduction and job creation, etc., are fundamentally class struggles.

According to Marx, class struggle is the main driving force behind the development of class society. The capitalist mode of production has eliminated the various complex social classes of the past and split society into three classes of simple opposites: landowners, capitalists and workers. At the same time the inherent contradictions of the capitalist mode of production make the complete elimination of classes and class differences, and hence of class struggle, a direct social task. The working class must assume the historical responsibility of eliminating the capitalist mode of production, Marx said, "The proletariat is nothing if not revolutionary." The historical responsibility of the working class to eliminate the capitalist mode of production is realized through class struggle. The class consciousness of the working class is also formed through class struggle. Lenin quoted, "Behind every strike lies the hydra of socialist revolution."

Marx said, "As the unity of the process of labor and the process of value formation, the process of production is the process of commodity production; as the unity of the process of labor and the process of value multiplication, the process of production is the process of capitalist production, the capitalist form of commodity production." The theory of surplus value is the core of Marxian economics, and it must be grasped closely in order to appreciate the essence of Marxian economics and to master other related elements. Economics is by no means merely a technical science; it is centered on the reality of profit. In fact, economists before Marx had already realized the existence of surplus value in one way or another and had explained it more or less. But it was only Marx who for the first time scientifically explained the specific process by which surplus value is produced. Engels once gave an example from the history of chemistry to illustrate Marx's contribution. Before Lavoisier, there had been chemists who had in fact isolated oxygen from the air, but they did not know what they were getting, and were still explaining it in terms of the then-popular "phlogiston". Only Lavoisier realized that not only could the gas not be explained by the "pyrogen" theory, but on the contrary, the gas completely refuted the "pyrogen" theory, thus triggering a revolution in chemical theory.

The nature of capital is to chase surplus value. The essence of capital is the relationship between capitalists and workers. "The secret of capital's self-expanding multiplication boils down to capital's dominion over a certain amount of unpaid labor of others." (Marx) This will be explained in the next chapter, Wages.

Summary:

The theory of surplus value is Marx's most significant theoretical contribution, and along with the materialist conception of history, it is referred to by Engels as Marx's two major scientific discoveries. If the labor theory of value is the foundation of Marxist economics, then the theory of surplus value is the core of Marxist economics. Marx's doctrines about capital are based on the theory of surplus value. So be sure to get a deeper understanding of the theory of surplus value. For this part, see Capital, Volume I, Part III, The Production of Absolute Surplus Value, Part IV, The Production of Relative Surplus Value, and Part V, The Production of Absolute and Relative Surplus Value.