Surplus product
Encyclopedia
Surplus product is a concept explicitly theorised by Karl Marx
in his critique of political economy
. Marx first began to work out his idea of surplus product in his 1844 notes on James Mill
's Elements of political economy. Notions of "surplus produce" have been used in economic thought and commerce for a long time (notably by the Physiocrats
), but in Das Kapital
and the Grundrisse
Marx gave the concept a central place in his interpretation of economic history. Nowadays the concept is mainly used in Marxian economics
, surplus economics
, political anthropology
, cultural anthropology
, economic anthropology
and archaeology
as well as sociology
and other social sciences.
The translation of the German "Mehr" as "surplus" is in a sense unfortunate, because it might be taken to suggest "unused", "not needed" or "redundant", while literally it means "more" or "added" - thus, "Mehrprodukt" refers really to the additional or "excess" product produced. In German, the term "Mehrwert" simply and literally means value-added, a measure of net output, (though, in Marx's specialist usage, it means the surplus-value obtained from the use of capital).
In classical political economy, the "surplus" referred to an excess of gross income over cost, which implied that the value of goods sold was greater than the value of the costs involved in producing or supplying them. That was how you could "make money" and get rich. The surplus represented a net addition to the stock of wealth. A central theoretical question was then to explain the kinds of influences on the size of the surplus, or how the surplus originated, since that had important consequences for the funds available for re-investment, the wealth of nations, and economic growth
. This was a confusing issue, because sometimes it seemed that a surplus arose out of clever trading, while at other times it seemed that the surplus arose because value was added in production. In other words, a surplus could be formed in different ways, and one could get rich either at the expense of someone else, or by creating more wealth than there was before. This raised the difficult problem of how then one could devise a system for grossing and netting incomes & expenditures to estimate the value of the new additional wealth created by a country. For centuries, there was little agreement about that, because rival economists each had their own theory of the real sources of wealth-creation.
In modern economics, however, this whole problem does not exist, or is not theorized in the same way. The main reason is that in modern economics, based on double-entry bookkeeping, the value of inputs is always exactly equal to the value of outputs. This mathematical or accounting identity holds true by definition, because the operating surplus (or gross profit) is treated as the "cost of capital" (as a "factor cost") and, therefore, it is treated both as an input as well as an output - instead of being the residual that remains after costs are deducted from gross sales revenue. Thus, total expenditure on inputs always balances exactly against total revenue from output sales. This view of the matter makes it impossible that the value of output created could ever be larger than the value of inputs. Another reason why the "surplus" problematic does not exist in modern economic theory is, because economists generally accept the standard national accounting system developed by Simon Kuznets
and Richard Stone
and adopted by UNSNA. The product account in this system offers standard measures for gross output
, value-added, factor costs and operating surplus
. These standards are nowadays used worldwide for the production of macro-economic statistics about wealth creation, such as GDP and its components.
and other writings, Marx divides the new "social product" of the working population (the flow of society's total output of new products in a defined time-interval) into the necessary product and the surplus product. Economically speaking, the "necessary" product refers to the output of products and services necessary to maintain a population of workers and their dependents at the prevailing standard of life (effectively, their total reproduction cost). The "surplus" product is whatever is produced in excess of those necessaries. Socially speaking, this division of the social product reflects the respective claims which the labouring class and the ruling class
make on the new wealth created.
Strictly speaking, however, such an abstract, general distinction is a simplification.
This is admitted by Marx in Capital, Volume III, chapter 48 where he writes:
"A definite quantity of surplus labour
is required as insurance against accidents, and by the necessary and progressive expansion of the process of reproduction in keeping with the development of the needs and the growth of population, which is called accumulation from the viewpoint of the capitalist."
of labour.
This social surplus product can be:
Thus, for a simple example, surplus seeds could be left to rot, stored, eaten, traded for other products, or sown on new fields. But if, for example, 90 people own 5 sacks of grain, and 10 people own 100 sacks of grain, it would be physically impossible for those 10 people to use all that grain themselves — most likely they would either trade that grain, or employ other people to farm it.
If the surplus product is simply held in reserve, wasted or consumed, no economic growth
(or enlarged economic reproduction
) occurs. Only when the surplus is traded and/or reinvested does it become possible to increase the scale of production. For most of the history of urban civilisation, excess foodstuffs were the main basis of the surplus product, whether appropriated through trade, tribute, taxation, or some other method.
The existence of a surplus product normally assumes the ability to perform surplus labour
, i.e. extra labour beyond that which is necessary to maintain the direct producers and their family dependents at the existing standard of life. In Capital, Vol. 1, chapter 9, section 4, Marx actually defines the capitalist surplus product exclusively in terms of the relationship between the value of necessary labour and surplus labour; at any one time, this surplus product is lodged simultaneously in money, commodities (goods), and claims to labour-services, and therefore is not simply a "physical" surplus product (a stockpile of additional goods). The concept expresses an abstract proportion which does not really refer to a static condition but to a continual flow of producing and distributing output.
In Marx's view, as he expresses it in the Grundrisse
all economising reduces to the economy of human labour-time. The greater human productivity
is, the more time there is — potentially — to produce more than is necessary to simply reproduce the population. Alternatively, that extra time can be devoted to leisure, but who gets the leisure and who gets to do the extra work is usually strongly influenced by the prevailing power
and moral
relations, not just economics.
The corollary of increasing wealth in society, with rising productivity, is that human needs and wants expand. Thus, as the surplus product increases, the necessary product per person also increases, which usually means an increase in the standard of living. In this context, Marx distinguishes between the physical minimum requirements for the maintenance of human life, and a moral-historical component of earnings from work. This distinction is however somewhat deceptive, since, in more complex societies at least, minimum living costs involve social and infrastructural services, which also incur costs, and which are not optional from the point of view of survival. In addition, which goods can be considered "luxuries" is not so easy to define. For example, owning a car may be considered a luxury, but if owning a car is indispensable for travelling to work and to shops, it is a necessity.
, Marxian writers like Ernest Mandel
and V. Gordon Childe argued, there existed no economic surplus product of any kind at all, except very small or incidental surpluses.
The main reasons were:
The formation of the first permanent surpluses are associated with tribal groups who are more or less settled in one territory, and stored foodstuffs. Once some reserves and surpluses exist, tribes can diversify their production, and members can specialise in producing tools, weapons, containers, and ornaments. Modern archaeological findings show that this development actually began in the more complex hunter-gatherer (foraging) societies. The formation of a reliable surplus product makes possible an initial technical or economic division of labour
in which producers exchange their products. In addition, a secure surplus product makes possible population growth
, i.e. less starvation, infanticide, or abandonment of the elderly or infirm.
The first real "take off" in terms of surpluses, economic growth, and population growth probably occurred during what V. Gordon Childe called the neolithic revolution
, i.e. the beginning of the widespread use of agriculture
, possibly from about 10,000 years ago onwards, at which time the world population
is estimated to have been somewhere between 1 and 10 million.
Archaeologist Geoffrey Dimbleby comments:
The neolithic revolution created a division of labour
between (rural) farmers and (urban) craftspeople who trade with each other, and more sophisticated forms of labour co-operation as well as the keeping of slaves. It makes possible an initial accumulation
of wealth, which in turn enables the formation of an elite
or ruling class
.
This group or class is permanently freed from the necessity to work for a living, and is therefore able to live off the labour of others. This could be regarded as exploitation
but also as a source of progress, insofar as the rulers have time to think and advance human knowledge
and technique.
The increasing economic division of labour is closely associated with the growth of trade
and goes together with an increasing a social
division of labour
. As Ashley Montagu
puts it, "barter, trade, and commerce largely depend on a society's exchangeable surpluses." One group in society utilizes its position in society (e.g. the management of reserves, military leadership, religious authority, etc.) to gain control over the social surplus product; as the people in this elite group assert their social power, everyone else is forced to leave the control over the surplus product to them. Although there is considerable controversy and speculation among archaeologists about how exactly these early rulers came to power (often because of a lack of written records), there is good evidence to suggest that the process does occur, particularly in tribal communities or clans which grow in size beyond 1,500 or so people.
From that point on, the surplus product is formed within a class relationship, in which the exploitation of surplus labour
combines with active or passive resistance to that exploitation. To maintain social order
and enforce a basic morality
, a centralized state
apparatus emerges, with soldiers and officials, as a distinct group in society which is subsidized from the surplus product, via taxes and tributes (usually paid "in kind"). Because the ruling elite controls the production and distribution of the surplus product, it thereby also controls the state. In turn, this gives rise to a moral or religious ideology
which justifies superior and inferior positions in the division of labour
, and explains why some people are naturally entitled to appropriate more resources than others. Archaeologist Chris Scarre
comments:
Archaeologist Bruce G. Trigger comments:
Archaeologist Brian M. Fagan comments:
According to Gil Stein (archaeologist)
, the earliest known state organizations emerged in Mesopotamia
(3700 BC), Egypt
(3300 BC), the Indus Valley (2500 BC) and China
(1400 BC).
But it would be erroneous to simply infer the pattern of socioeconomic inequality from the size of the surplus product. That would be like saying, "People are poor because they are poor". At each stage of the development of human society, there have always been different possibilities for a more equitable distribution of wealth. Which of those possibilities have been realised is not just a question of technique or productivity, but also of the assertion of power, ideology, and morals within the prevailing system of social relations governing legitimate cooperation and competition. The wealth of some may depend on the poverty of others.
Some scarcity is truly physical scarcity; other scarcity is purely socially constructed, i.e. people are excluded from wealth not by physical scarcity but through the way the social system functions (the system of property rights and distributing wealth that it has). In modern times, calculations have been done of the type that an annual levy of 5.2% on the fortunes of the world's 500 or so billionaires would be financially sufficient to guarantee essential needs for the whole world population.. In money terms, the world's 1,100 richest people have almost twice the assets of the poorest 2.5 billion people representing 40% of the world population.
In that case, there is no real physical scarcity with regard to the goods satisfying basic human needs anymore. It's more a question of political will and social organisation to improve the lot of the poor, or, alternatively, for the poor to organise themselves to improve their lot.
economic category, meaning it applies to any society with a stable division of labour, and a significant labour productivity, regardless of how exactly that surplus product is produced, what it consists of, and how it is distributed. That depends on the social relations and relations of production
specific to a society, within the framework of which surplus labour
is performed. Thus, the exact forms taken by the surplus product are specific to the type of society which creates it.
If we plotted economic growth or population growth rates on a graph from, let's say, the year zero, we would obtain a tangent curve, with the sharp bend occurring in the 19th century. Within the space of 100 years, a gigantic increase in productivity occurred with new forms of technology and labor-cooperation. This was, according to Marx, the "revolutionary" aspect of the capitalist mode of production
, and it meant a very large increase in the surplus product created by human labour. Marx believed it could be the material basis for a transition to communism
in the future, a form of human society in which all could live to their potential, because there was enough to satisfy all human needs for everybody.
Economic historian Paul Bairoch
comments:
Economic historian Roberto Sabatino Lopez
adds that:
Specific to the surplus product within capitalist society, as Marx discusses in Das Kapital
, are these main aspects (among others):
Marx believed that, by splitting purely economic-commercial considerations off from legal-moral, political or religious considerations, capitalist society for the first time in history made it possible to express the economic functions applying to all types of society in their purest forms. In pre-capitalist society, "the economy" did not exist as a separate abstraction
or reality
, anymore than long-term mass unemployment
existed (other than in exceptional cases, such as wars or natural disasters). It is only when the "cash nexus" mediates most resource allocation, that "the economy" becomes viewed as a separate domain (the domain of commercial activity), quantifiable by means of money-prices.
A socialist society, Marxian economists argue, also has a surplus product from an economic point of view, but its creation and distribution would begin to operate with different rules. In particular, how the new wealth is allocated would be decided much more according to popular-democratic and egalitarian principles, using a variety of property forms and allocative methods that have proved practically to correspond best to meeting the human needs of all. 20th century experience with economic management shows that there is a broad scala of possibilities here; if some options are chosen, and others not, this has more to do with who holds political power than anything else.
If it is known:
then measures of the necessary product and surplus product can in principle be estimated.
However it is never possible to obtain mathematically exact or fully objective distinctions between necessary and surplus product, because social needs and investment requirements are always subject to moral debate and political contests between social classes. At best, some statistical indicators can be developed. In Das Kapital
, Marx himself was less concerned with measurement issues than with the social relations involved in the production and distribution of the surplus product.
Essentially the techniques for estimating the size of the surplus product in a capitalist economy are similar to those for measuring surplus-value. However, some components of the surplus product may not be marketed products or services. The existence of markets always presupposes a lot of non-market labour as well. A physical surplus product is not the same as surplus value, and the magnitudes of surplus product, surplus labour and surplus value may diverge.
Very interesting information has become available from time use survey
s however on how people in society on average spend their time. From this data, it is evident just how much modern market economies in reality depend on the performance of unpaid (i.e. volunteered) labour. That is, the forms of labour that are the subject of commercial exploitation are quantitatively only a sub-set of the total labour which is done in a society, and depend on non-market labour being performed.
This in turn creates a specific and characteristic way in which different labour activities are valued and prioritised. Some forms of labour can command a high price, others have no price at all, or are priceless. Nevertheless all labor in capitalist society is influenced by value relations, irrespective of whether a price happens to be imputed to it or not. The commercial valuation of labor may not necessarily say anything though about the social or human valuation of labor.
Marx & Engels suggest in The German Ideology that in this case the productive forces
are transformed into destructive forces.
According to Marxian theory, decaying or decadent societies are defined mainly by the fact that:
Marxian scholars such as Ernest Mandel
argued this condition typically involves a stalemate in the balance of power between social classes, none of which is really able to assert its dominance, and thus able to implement a constructive programme of action that would ensure real social progress and benefit the whole population. According to Herbert Marcuse
, a society is "sick" if its basic institutions and relationships are such that they make it impossible to use resources for the optimal development of human existence.
However, there is a lot of controversy among historians and politicians about the existence and nature of decadence, because value judgements and biases about the meaning of human progress are usually involved. In different periods of history, people have defined decadence
in very different ways. For example, hedonism
is not necessarily decadent; it is decadent only within a certain context. Thus, accusations of decadence may be made which only reflect a certain moral feeling of social classes, not a true objective
reality.
Anthropologist Robert L. Carneiro
also comments:
, i.e. because the aim of commercial trade is to grow richer out of it, to accumulate wealth. This can ultimately only occur, if the total stock of assets available for distribution itself grows, as a result of more being produced than existed before. The more surplus there is, the more there is that can be appropriated and traded in order to make money out of it. If people just consume what they produce themselves, other people cannot get rich from that.
Thus, because the accumulation of capital normally stimulates the growth of the productive forces
, this has the effect that the size of the surplus product which can be traded will normally grow also. The more the trading network then expands, the more complex and specialized the division of labour
will become, and the more products people will produce which are surplus to their own requirements. Gradually, the old system of subsistence production is completely destroyed and replaced with commercial production, which means that people must then necessarily trade in order to meet their needs ("market civilization"). Their labour becomes social labour, i.e. labour which produces products for others - products which they don't consume themselves.
It is, of course, also possible to amass wealth simply by taking it off other people in some way, but once this appropriation has occurred, the source of additional wealth vanishes, and the original owners are no longer so motivated to produce surpluses, simply because they know their products will be taken off them (they no longer reap the rewards of their own production, in which case the only way to extract more wealth from them is by forcing them to produce more). It's like killing the goose that lays the golden egg.
In The Wealth of Nations Adam Smith
had already recognized the central importance of the division of labour for economic growth, on the ground that it increased productivity
("industriousness" or "efficiency"), but, Marx suggests, Smith failed to theorize clearly why the division of labour stimulated economic growth.
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
in his critique of political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
. Marx first began to work out his idea of surplus product in his 1844 notes on James Mill
James Mill
James Mill was a Scottish historian, economist, political theorist, and philosopher. He was a founder of classical economics, together with David Ricardo, and the father of influential philosopher of classical liberalism, John Stuart Mill.-Life:Mill was born at Northwater Bridge, in the parish of...
's Elements of political economy. Notions of "surplus produce" have been used in economic thought and commerce for a long time (notably by the Physiocrats
Physiocrats
Physiocracy is an economic theory developed by the Physiocrats, a group of economists who believed that the wealth of nations was derived solely from the value of "land agriculture" or "land development." Their theories originated in France and were most popular during the second half of the 18th...
), but in Das Kapital
Das Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
and the Grundrisse
Grundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...
Marx gave the concept a central place in his interpretation of economic history. Nowadays the concept is mainly used in Marxian economics
Marxian economics
Marxian economics refers to economic theories on the functioning of capitalism based on the works of Karl Marx. Adherents of Marxian economics, particularly in academia, distinguish it from Marxism as a political ideology and sociological theory, arguing that Marx's approach to understanding the...
, surplus economics
Surplus economics
Surplus economics is the study of economics based upon the concept that economies operate on the basis of the production of a surplus over basic needs.-Economic Surplus:...
, political anthropology
Political anthropology
Political anthropology concerns the structure of political systems, looked at from the basis of the structure of societies. Political anthropologists include Pierre Clastres, E. E. Evans-Pritchard, Meyer Fortes, Georges Balandier, Fredrik Bailey, Jeremy Boissevain, Marc Abélès, Jocelyne...
, cultural anthropology
Cultural anthropology
Cultural anthropology is a branch of anthropology focused on the study of cultural variation among humans, collecting data about the impact of global economic and political processes on local cultural realities. Anthropologists use a variety of methods, including participant observation,...
, economic anthropology
Economic anthropology
Economic anthropology is a scholarly field that attempts to explain human economic behavior using the tools of both economics and anthropology. It is practiced by anthropologists and has a complex relationship with economics...
and archaeology
Archaeology
Archaeology, or archeology , is the study of human society, primarily through the recovery and analysis of the material culture and environmental data that they have left behind, which includes artifacts, architecture, biofacts and cultural landscapes...
as well as sociology
Sociology
Sociology is the study of society. It is a social science—a term with which it is sometimes synonymous—which uses various methods of empirical investigation and critical analysis to develop a body of knowledge about human social activity...
and other social sciences.
The translation of the German "Mehr" as "surplus" is in a sense unfortunate, because it might be taken to suggest "unused", "not needed" or "redundant", while literally it means "more" or "added" - thus, "Mehrprodukt" refers really to the additional or "excess" product produced. In German, the term "Mehrwert" simply and literally means value-added, a measure of net output, (though, in Marx's specialist usage, it means the surplus-value obtained from the use of capital).
In classical political economy, the "surplus" referred to an excess of gross income over cost, which implied that the value of goods sold was greater than the value of the costs involved in producing or supplying them. That was how you could "make money" and get rich. The surplus represented a net addition to the stock of wealth. A central theoretical question was then to explain the kinds of influences on the size of the surplus, or how the surplus originated, since that had important consequences for the funds available for re-investment, the wealth of nations, and economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
. This was a confusing issue, because sometimes it seemed that a surplus arose out of clever trading, while at other times it seemed that the surplus arose because value was added in production. In other words, a surplus could be formed in different ways, and one could get rich either at the expense of someone else, or by creating more wealth than there was before. This raised the difficult problem of how then one could devise a system for grossing and netting incomes & expenditures to estimate the value of the new additional wealth created by a country. For centuries, there was little agreement about that, because rival economists each had their own theory of the real sources of wealth-creation.
In modern economics, however, this whole problem does not exist, or is not theorized in the same way. The main reason is that in modern economics, based on double-entry bookkeeping, the value of inputs is always exactly equal to the value of outputs. This mathematical or accounting identity holds true by definition, because the operating surplus (or gross profit) is treated as the "cost of capital" (as a "factor cost") and, therefore, it is treated both as an input as well as an output - instead of being the residual that remains after costs are deducted from gross sales revenue. Thus, total expenditure on inputs always balances exactly against total revenue from output sales. This view of the matter makes it impossible that the value of output created could ever be larger than the value of inputs. Another reason why the "surplus" problematic does not exist in modern economic theory is, because economists generally accept the standard national accounting system developed by Simon Kuznets
Simon Kuznets
Simon Smith Kuznets was a Russian American economist at the Wharton School of the University of Pennsylvania who won the 1971 Nobel Memorial Prize in Economic Sciences "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and...
and Richard Stone
Richard Stone
Sir John Richard Nicholas Stone was an eminent British economist who in 1984 received the Nobel Memorial Prize in Economic Sciences for developing an accounting model that could be used to track economic activities on a national and, later, an international scale...
and adopted by UNSNA. The product account in this system offers standard measures for gross output
Gross Output
Gross output is an economic concept used in national accounts such as the United Nations System of National Accounts and the US National Income and Product Accounts...
, value-added, factor costs and operating surplus
Operating surplus
Operating surplus is an accounting concept used in national accounts statistics Operating surplus is an accounting concept used in national accounts statistics Operating surplus is an accounting concept used in national accounts statistics (such as United Nations System of National Accounts (UNSNA)...
. These standards are nowadays used worldwide for the production of macro-economic statistics about wealth creation, such as GDP and its components.
Definition
In Das KapitalDas Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
and other writings, Marx divides the new "social product" of the working population (the flow of society's total output of new products in a defined time-interval) into the necessary product and the surplus product. Economically speaking, the "necessary" product refers to the output of products and services necessary to maintain a population of workers and their dependents at the prevailing standard of life (effectively, their total reproduction cost). The "surplus" product is whatever is produced in excess of those necessaries. Socially speaking, this division of the social product reflects the respective claims which the labouring class and the ruling class
Ruling class
The term ruling class refers to the social class of a given society that decides upon and sets that society's political policy - assuming there is one such particular class in the given society....
make on the new wealth created.
Strictly speaking, however, such an abstract, general distinction is a simplification.
- A society must usually also hold a fraction of the new social product in reserve at any time. These reserves (sometimes called "strategic stocks") by definition are not usually available for immediate distribution, but stored in some way, yet they are a necessary condition for longer-term survival. Such reserves must be maintained, even if no other excess to immediate requirements is produced, and therefore they can be considered a permanent reproduction cost, viewed over a longer interval of time, rather than as a true surplus.
- An additional complicating factor is population growth, since a growing population means that "more product" must be produced purely to ensure the survival of that population. In primitive societies, insufficient output just means that people will die, but in complex societies, continually "producing more" is physically necessary to sustain a growing population.
This is admitted by Marx in Capital, Volume III, chapter 48 where he writes:
"A definite quantity of surplus labour
Surplus labour
Surplus labour is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker . According to Marxian economics, surplus labour is usually "unpaid labour"...
is required as insurance against accidents, and by the necessary and progressive expansion of the process of reproduction in keeping with the development of the needs and the growth of population, which is called accumulation from the viewpoint of the capitalist."
- At any time, a fraction of the adult working-age population does not work at all, yet these people must somehow be sustained as well. Insofar as they do not depend directly on the producers of the necessary product for their maintenance, they have to be sustained from communal or state resources, or by some other means.
Use of the surplus product
In producing, people must continually maintain their assets, replace assets, and consume things (productive consumption and final consumption) but they also can create more beyond those requirements, assuming sufficient productivityProductivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
of labour.
This social surplus product can be:
- destroyed, or wasted
- held in reserve, or hoarded
- consumed
- traded
- reinvested (accumulated)
Thus, for a simple example, surplus seeds could be left to rot, stored, eaten, traded for other products, or sown on new fields. But if, for example, 90 people own 5 sacks of grain, and 10 people own 100 sacks of grain, it would be physically impossible for those 10 people to use all that grain themselves — most likely they would either trade that grain, or employ other people to farm it.
If the surplus product is simply held in reserve, wasted or consumed, no economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
(or enlarged economic reproduction
Reproduction (economics)
In Marxian economics, economic reproduction refers to recurrent processes by which the initial conditions necessary for economic activity to occur are constantly re-created...
) occurs. Only when the surplus is traded and/or reinvested does it become possible to increase the scale of production. For most of the history of urban civilisation, excess foodstuffs were the main basis of the surplus product, whether appropriated through trade, tribute, taxation, or some other method.
The existence of a surplus product normally assumes the ability to perform surplus labour
Surplus labour
Surplus labour is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker . According to Marxian economics, surplus labour is usually "unpaid labour"...
, i.e. extra labour beyond that which is necessary to maintain the direct producers and their family dependents at the existing standard of life. In Capital, Vol. 1, chapter 9, section 4, Marx actually defines the capitalist surplus product exclusively in terms of the relationship between the value of necessary labour and surplus labour; at any one time, this surplus product is lodged simultaneously in money, commodities (goods), and claims to labour-services, and therefore is not simply a "physical" surplus product (a stockpile of additional goods). The concept expresses an abstract proportion which does not really refer to a static condition but to a continual flow of producing and distributing output.
In Marx's view, as he expresses it in the Grundrisse
Grundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...
all economising reduces to the economy of human labour-time. The greater human productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
is, the more time there is — potentially — to produce more than is necessary to simply reproduce the population. Alternatively, that extra time can be devoted to leisure, but who gets the leisure and who gets to do the extra work is usually strongly influenced by the prevailing power
Power (sociology)
Power is a measurement of an entity's ability to control its environment, including the behavior of other entities. The term authority is often used for power perceived as legitimate by the social structure. Power can be seen as evil or unjust, but the exercise of power is accepted as endemic to...
and moral
Moral
A moral is a message conveyed or a lesson to be learned from a story or event. The moral may be left to the hearer, reader or viewer to determine for themselves, or may be explicitly encapsulated in a maxim...
relations, not just economics.
The corollary of increasing wealth in society, with rising productivity, is that human needs and wants expand. Thus, as the surplus product increases, the necessary product per person also increases, which usually means an increase in the standard of living. In this context, Marx distinguishes between the physical minimum requirements for the maintenance of human life, and a moral-historical component of earnings from work. This distinction is however somewhat deceptive, since, in more complex societies at least, minimum living costs involve social and infrastructural services, which also incur costs, and which are not optional from the point of view of survival. In addition, which goods can be considered "luxuries" is not so easy to define. For example, owning a car may be considered a luxury, but if owning a car is indispensable for travelling to work and to shops, it is a necessity.
Marxian interpretation of the historical origin of the surplus product
For most of human prehistoryPrehistory
Prehistory is the span of time before recorded history. Prehistory can refer to the period of human existence before the availability of those written records with which recorded history begins. More broadly, it refers to all the time preceding human existence and the invention of writing...
, Marxian writers like Ernest Mandel
Ernest Mandel
Ernest Ezra Mandel, also known by various pseudonyms such as Ernest Germain, Pierre Gousset, Henri Vallin, Walter , was a revolutionary Marxist theorist.-Life:...
and V. Gordon Childe argued, there existed no economic surplus product of any kind at all, except very small or incidental surpluses.
The main reasons were:
- that techniques were lacking to store, preserve, and package surpluses securely in large quantities or transport them reliably in large quantities over any significant distance;
- the productivity of labour was not sufficient to create much more than could be consumed by a small tribe;
- early tribal societies were mostly not oriented to producing more than they could actually use themselves, never mind maximising their production of output. Thus, for example, the anthropologist Marshall SahlinsMarshall SahlinsMarshall David Sahlins is a prominent American anthropologist. He received both a Bachelors and Masters degree at the University of Michigan where he studied with Leslie White, and earned his Ph.D. at Columbia University in 1954 where his main intellectual influences included Karl Polanyi and...
estimated that the utilization by tribes of the "carrying capacity" of their habitatHabitat* Habitat , a place where a species lives and grows*Human habitat, a place where humans live, work or play** Space habitat, a space station intended as a permanent settlement...
ranged from 7% among the KuikuroKuikuroThe Kuikuro are an indigenous ethnic group from the Mato Grosso region of Brazil. Their language, Kuikuro, is a part of the Karib language family. The Kuikuro have many similarities with other Xingu tribes...
of Amazonia to about 75% among the LalaLalaLala VC was an Indian recipient of the Victoria Cross, the highest and most prestigious award for gallantry in the face of the enemy that can be awarded to British and Commonwealth soldiers.-Details:...
of ZambiaZambiaZambia , officially the Republic of Zambia, is a landlocked country in Southern Africa. The neighbouring countries are the Democratic Republic of the Congo to the north, Tanzania to the north-east, Malawi to the east, Mozambique, Zimbabwe, Botswana and Namibia to the south, and Angola to the west....
. - different groups of people usually did not depend on trade for their survival, and the total amount of trading activity in society stayed proportionally small.
The formation of the first permanent surpluses are associated with tribal groups who are more or less settled in one territory, and stored foodstuffs. Once some reserves and surpluses exist, tribes can diversify their production, and members can specialise in producing tools, weapons, containers, and ornaments. Modern archaeological findings show that this development actually began in the more complex hunter-gatherer (foraging) societies. The formation of a reliable surplus product makes possible an initial technical or economic division of labour
Division of labour
Division of labour is the specialisation of cooperative labour in specific, circumscribed tasks and likeroles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialisation...
in which producers exchange their products. In addition, a secure surplus product makes possible population growth
Population growth
Population growth is the change in a population over time, and can be quantified as the change in the number of individuals of any species in a population using "per unit time" for measurement....
, i.e. less starvation, infanticide, or abandonment of the elderly or infirm.
The first real "take off" in terms of surpluses, economic growth, and population growth probably occurred during what V. Gordon Childe called the neolithic revolution
Neolithic Revolution
The Neolithic Revolution was the first agricultural revolution. It was the transition from hunting and gathering to agriculture and settlement. Archaeological data indicates that various forms of plants and animal domestication evolved independently in 6 separate locations worldwide circa...
, i.e. the beginning of the widespread use of agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
, possibly from about 10,000 years ago onwards, at which time the world population
World population
The world population is the total number of living humans on the planet Earth. As of today, it is estimated to be billion by the United States Census Bureau...
is estimated to have been somewhere between 1 and 10 million.
Archaeologist Geoffrey Dimbleby comments:
The neolithic revolution created a division of labour
Division of labour
Division of labour is the specialisation of cooperative labour in specific, circumscribed tasks and likeroles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialisation...
between (rural) farmers and (urban) craftspeople who trade with each other, and more sophisticated forms of labour co-operation as well as the keeping of slaves. It makes possible an initial accumulation
Capital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
of wealth, which in turn enables the formation of an elite
Elite
Elite refers to an exceptional or privileged group that wields considerable power within its sphere of influence...
or ruling class
Ruling class
The term ruling class refers to the social class of a given society that decides upon and sets that society's political policy - assuming there is one such particular class in the given society....
.
This group or class is permanently freed from the necessity to work for a living, and is therefore able to live off the labour of others. This could be regarded as exploitation
Exploitation
This article discusses the term exploitation in the meaning of using something in an unjust or cruel manner.- As unjust benefit :In political economy, economics, and sociology, exploitation involves a persistent social relationship in which certain persons are being mistreated or unfairly used for...
but also as a source of progress, insofar as the rulers have time to think and advance human knowledge
Knowledge
Knowledge is a familiarity with someone or something unknown, which can include information, facts, descriptions, or skills acquired through experience or education. It can refer to the theoretical or practical understanding of a subject...
and technique.
The increasing economic division of labour is closely associated with the growth of trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
and goes together with an increasing a social
Social
The term social refers to a characteristic of living organisms...
division of labour
Division of labour
Division of labour is the specialisation of cooperative labour in specific, circumscribed tasks and likeroles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialisation...
. As Ashley Montagu
Ashley Montagu
Montague Francis Ashley Montagu was a British-American anthropologist and humanist, of Jewish ancestry, who popularized topics such as race and gender and their relation to politics and development...
puts it, "barter, trade, and commerce largely depend on a society's exchangeable surpluses." One group in society utilizes its position in society (e.g. the management of reserves, military leadership, religious authority, etc.) to gain control over the social surplus product; as the people in this elite group assert their social power, everyone else is forced to leave the control over the surplus product to them. Although there is considerable controversy and speculation among archaeologists about how exactly these early rulers came to power (often because of a lack of written records), there is good evidence to suggest that the process does occur, particularly in tribal communities or clans which grow in size beyond 1,500 or so people.
From that point on, the surplus product is formed within a class relationship, in which the exploitation of surplus labour
Surplus labour
Surplus labour is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker . According to Marxian economics, surplus labour is usually "unpaid labour"...
combines with active or passive resistance to that exploitation. To maintain social order
Social order
Social order is a concept used in sociology, history and other social sciences. It refers to a set of linked social structures, social institutions and social practices which conserve, maintain and enforce "normal" ways of relating and behaving....
and enforce a basic morality
Morality
Morality is the differentiation among intentions, decisions, and actions between those that are good and bad . A moral code is a system of morality and a moral is any one practice or teaching within a moral code...
, a centralized state
State (polity)
A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
apparatus emerges, with soldiers and officials, as a distinct group in society which is subsidized from the surplus product, via taxes and tributes (usually paid "in kind"). Because the ruling elite controls the production and distribution of the surplus product, it thereby also controls the state. In turn, this gives rise to a moral or religious ideology
Ideology
An ideology is a set of ideas that constitutes one's goals, expectations, and actions. An ideology can be thought of as a comprehensive vision, as a way of looking at things , as in common sense and several philosophical tendencies , or a set of ideas proposed by the dominant class of a society to...
which justifies superior and inferior positions in the division of labour
Division of labour
Division of labour is the specialisation of cooperative labour in specific, circumscribed tasks and likeroles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialisation...
, and explains why some people are naturally entitled to appropriate more resources than others. Archaeologist Chris Scarre
Chris Scarre
Chris Scarre is a writer in the fields of archaeology and ancient history.He obtained his MA and PhD degrees from the University of Cambridge and is a professor in the Archaeology department at Durham University....
comments:
Archaeologist Bruce G. Trigger comments:
Archaeologist Brian M. Fagan comments:
According to Gil Stein (archaeologist)
Gil Stein (archaeologist)
Gil Stein is an American archaeologist and current director of the Oriental Institute at the University of Chicago.Stein received a B.A. from Yale University in 1978 and a Ph.D. in 1988 from the University of Pennsylvania.-Publications:...
, the earliest known state organizations emerged in Mesopotamia
Mesopotamia
Mesopotamia is a toponym for the area of the Tigris–Euphrates river system, largely corresponding to modern-day Iraq, northeastern Syria, southeastern Turkey and southwestern Iran.Widely considered to be the cradle of civilization, Bronze Age Mesopotamia included Sumer and the...
(3700 BC), Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...
(3300 BC), the Indus Valley (2500 BC) and China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
(1400 BC).
Surplus product and socio-economic inequality between people
The size of the surplus product, based on a certain level of productivity, has implications for how it can possibly be shared out. Quite simply, if there is not enough to go around, it cannot be shared equally. If 10 products are produced, and there are 100 people, it is fairly obvious they cannot all consume or use them; most likely, some will get the products, and others must do without. This is according to Marx and Engels the ultimate reason for socioeconomic inequality, and why, for thousands of years, all attempts at an egalitarian society failed. Thus they wrote:But it would be erroneous to simply infer the pattern of socioeconomic inequality from the size of the surplus product. That would be like saying, "People are poor because they are poor". At each stage of the development of human society, there have always been different possibilities for a more equitable distribution of wealth. Which of those possibilities have been realised is not just a question of technique or productivity, but also of the assertion of power, ideology, and morals within the prevailing system of social relations governing legitimate cooperation and competition. The wealth of some may depend on the poverty of others.
Some scarcity is truly physical scarcity; other scarcity is purely socially constructed, i.e. people are excluded from wealth not by physical scarcity but through the way the social system functions (the system of property rights and distributing wealth that it has). In modern times, calculations have been done of the type that an annual levy of 5.2% on the fortunes of the world's 500 or so billionaires would be financially sufficient to guarantee essential needs for the whole world population.. In money terms, the world's 1,100 richest people have almost twice the assets of the poorest 2.5 billion people representing 40% of the world population.
In that case, there is no real physical scarcity with regard to the goods satisfying basic human needs anymore. It's more a question of political will and social organisation to improve the lot of the poor, or, alternatively, for the poor to organise themselves to improve their lot.
Surplus product in capitalist society
The category of surplus product is a transhistoricalTranshistorical
Transhistoricity is the quality of holding throughout human history, not merely within the frame of reference of a particular form of society at a particular stage of historical development. An entity or concept that has transhistoricity is said to be transhistorical.Certain theories of history,...
economic category, meaning it applies to any society with a stable division of labour, and a significant labour productivity, regardless of how exactly that surplus product is produced, what it consists of, and how it is distributed. That depends on the social relations and relations of production
Relations of production
Relations of production is a concept frequently used by Karl Marx and Friedrich Engels in their theory of historical materialism, and in Das Kapital...
specific to a society, within the framework of which surplus labour
Surplus labour
Surplus labour is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker . According to Marxian economics, surplus labour is usually "unpaid labour"...
is performed. Thus, the exact forms taken by the surplus product are specific to the type of society which creates it.
If we plotted economic growth or population growth rates on a graph from, let's say, the year zero, we would obtain a tangent curve, with the sharp bend occurring in the 19th century. Within the space of 100 years, a gigantic increase in productivity occurred with new forms of technology and labor-cooperation. This was, according to Marx, the "revolutionary" aspect of the capitalist mode of production
Capitalist mode of production
In Marx's critique of political economy, the capitalist mode of production is the production system of capitalist societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world...
, and it meant a very large increase in the surplus product created by human labour. Marx believed it could be the material basis for a transition to communism
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
in the future, a form of human society in which all could live to their potential, because there was enough to satisfy all human needs for everybody.
Economic historian Paul Bairoch
Paul Bairoch
Born of Jewish parents who emigrated from Poland, Paul Bairoch was one of the great post-war economic historians who specialized in global economic history, urban history and historical demography...
comments:
Economic historian Roberto Sabatino Lopez
Roberto Sabatino Lopez
Roberto Sabatino Lopez , also known as Robert S. Lopez, was an Italian-American historian of medieval European economic history...
adds that:
Specific to the surplus product within capitalist society, as Marx discusses in Das Kapital
Das Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
, are these main aspects (among others):
- The surplus product itself no longer consists simply of "physical" surpluses or tangible use-values, but increasingly of tradeable commoditiesCommodity (Marxism)In classical political economy and especially Karl Marx's critique of political economy, a commodity is any good or service produced by human labour and offered as a product for general sale on the market. Some other priced goods are also treated as commodities, e.g...
or assets convertible into moneyMoneyMoney is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
. Claims to the social product are realised primarily through purchase with money, and the social product itself can be valued in money prices.
- The economising and division of the necessary and surplus product between different uses, and between different social classes, is increasingly also expressed in quantities of moneyMoneyMoney is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
units. The emphasis is on maximising wealth as such, based on calculations in terms of abstract price relations.
- There is an increasingly strong connection between the surplus product and surplus valueSurplus valueSurplus value is a concept used famously by Karl Marx in his critique of political economy. Although Marx did not himself invent the term, he developed the concept...
, so that, as the capitalist mode of productionCapitalist mode of productionIn Marx's critique of political economy, the capitalist mode of production is the production system of capitalist societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world...
expands and displaces other ways of producing, surplus-value and the surplus-product become to a large extent identical. In a purely capitalist society they would be completely identical (but such a society is unlikely ever to exist, other than in economic models and analogies).
- The ability to claim the surplus value created in production through the production of new output, in the form of profit income, becomes very dependent on market sales and buying power. If goods and services fail to sell, because people have no money, the business owner is left with surpluses which are useless to him, and which very likely deteriorate in value. This creates a constant need to maintain and expand market demand, and a growing world market for products and services.
- Competition between many different private enterprises exerts a strong compulsion to accumulateCapital accumulationThe accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
(invest) a large part of the surplus product to maintain and improve market position, rather than consume it. Failure to do so would drive business owners out of business. For Marx, this was the main cause behind the gigantic increase in economic growth during the 19th century.
- The corollary of the enormous increase in physical productivity (output of goods) is that a larger and larger component of the social product, valued in money prices, consists of the productionProduction, costs, and pricingThe following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
and consumptionConsumption (economics)Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
of services. This leads to a redefinition of wealth: not just a stock of assets, but also the ability to consume services enhancing the quality of life (note: many activities called "services" supply tangible products).
- The dialectic of scarcity and surplus gradually begins to invert itself: the problem of optimal allocation of scarce resources begins to give away to the problem of the optimal allocation of abundant resources. High productivity leads to excess capacity: more resources can be produced than can be consumed, mainly because buying power is lacking among the masses. This can lead to dumpingDumpingDumping may refer to a subject......in computing:*Recording the contents of memory after application or operating system failure, or by operator request, in a core dump for use in subsequent problem analysis.*Recording a file or medium as a backup....
practices. At the same time, the ownership of wealth becomes strongly concentrated, shutting out huge masses of people from owning any significant assets.
Marx believed that, by splitting purely economic-commercial considerations off from legal-moral, political or religious considerations, capitalist society for the first time in history made it possible to express the economic functions applying to all types of society in their purest forms. In pre-capitalist society, "the economy" did not exist as a separate abstraction
Abstraction
Abstraction is a process by which higher concepts are derived from the usage and classification of literal concepts, first principles, or other methods....
or reality
Reality
In philosophy, reality is the state of things as they actually exist, rather than as they may appear or might be imagined. In a wider definition, reality includes everything that is and has been, whether or not it is observable or comprehensible...
, anymore than long-term mass unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
existed (other than in exceptional cases, such as wars or natural disasters). It is only when the "cash nexus" mediates most resource allocation, that "the economy" becomes viewed as a separate domain (the domain of commercial activity), quantifiable by means of money-prices.
A socialist society, Marxian economists argue, also has a surplus product from an economic point of view, but its creation and distribution would begin to operate with different rules. In particular, how the new wealth is allocated would be decided much more according to popular-democratic and egalitarian principles, using a variety of property forms and allocative methods that have proved practically to correspond best to meeting the human needs of all. 20th century experience with economic management shows that there is a broad scala of possibilities here; if some options are chosen, and others not, this has more to do with who holds political power than anything else.
Measurement of the surplus product
The magnitude of the surplus product can be estimated in stocks of physical use-values, in money prices, or in labour hours.If it is known:
- what and how much was produced in a year,
- what the populationPopulationA population is all the organisms that both belong to the same group or species and live in the same geographical area. The area that is used to define a sexual population is such that inter-breeding is possible between any pair within the area and more probable than cross-breeding with individuals...
structure is, - what incomes or earningsEarningsEarnings are the net benefits of a Corporation's operation. Earnings is also the amount on which corporate tax is due. For an analysis of specific aspects of corporate operations several more specific terms are used as EBIT -- earnings before interest and taxes, EBITDA - earnings before...
were received, - how many hours were worked in different occupations,
- what the normal actual consumptionConsumptionConsumption may refer to:Economics* Use of final goods by a consumer until disposal* Consumption * Consumption function, an economic formula* Consumption Sociology* Consumption Other...
pattern is, - what the producers pay in terms of taxes or tributeTributeA tribute is wealth, often in kind, that one party gives to another as a sign of respect or, as was often the case in historical contexts, of submission or allegiance. Various ancient states, which could be called suzerains, exacted tribute from areas they had conquered or threatened to conquer...
then measures of the necessary product and surplus product can in principle be estimated.
However it is never possible to obtain mathematically exact or fully objective distinctions between necessary and surplus product, because social needs and investment requirements are always subject to moral debate and political contests between social classes. At best, some statistical indicators can be developed. In Das Kapital
Das Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
, Marx himself was less concerned with measurement issues than with the social relations involved in the production and distribution of the surplus product.
Essentially the techniques for estimating the size of the surplus product in a capitalist economy are similar to those for measuring surplus-value. However, some components of the surplus product may not be marketed products or services. The existence of markets always presupposes a lot of non-market labour as well. A physical surplus product is not the same as surplus value, and the magnitudes of surplus product, surplus labour and surplus value may diverge.
Surplus product and the social valuation of labour
Although it is nowadays possible to measure the number of hours worked in a country with reasonable accuracy, there have been few attempts by social statisticians to estimate the surplus product in terms of labour hours.Very interesting information has become available from time use survey
Time use survey
A Time Use Survey is a statistical survey which aims to report data on how, on average, people spend their time.- Objectives :The objective is to identify, classify and quantify the main types of activity that people engage in during a definitive time period, e.g...
s however on how people in society on average spend their time. From this data, it is evident just how much modern market economies in reality depend on the performance of unpaid (i.e. volunteered) labour. That is, the forms of labour that are the subject of commercial exploitation are quantitatively only a sub-set of the total labour which is done in a society, and depend on non-market labour being performed.
This in turn creates a specific and characteristic way in which different labour activities are valued and prioritised. Some forms of labour can command a high price, others have no price at all, or are priceless. Nevertheless all labor in capitalist society is influenced by value relations, irrespective of whether a price happens to be imputed to it or not. The commercial valuation of labor may not necessarily say anything though about the social or human valuation of labor.
Surplus product and decadence
Marxian theory suggests decadence involves a clear waste of a large part of the surplus product from any balanced or nuanced human point of view, and it typically goes together with a growing indifference to the wellbeing and fate of other human beings; to survive, people are forced to shut out from their consciousness those horrors which are seemingly beyond their ability to do anything about anymore.Marx & Engels suggest in The German Ideology that in this case the productive forces
Productive forces
Productive forces, "productive powers" or "forces of production" [in German, Produktivkräfte] is a central idea in Marxism and historical materialism....
are transformed into destructive forces.
According to Marxian theory, decaying or decadent societies are defined mainly by the fact that:
- The gap between what is produced and what could potentially (or technically) be produced (sometimes called the "GDP gap" or "output gap") grows sharply.
- A very large proportion of the surplus product is squandered, or devoted to luxury consumption, speculative activity, or military expenditures.
- All sorts of activities and products appear which are really useless or even harmful from the point of view of improving human life, to the detriment of activities which are more healthy for human life as a whole.
- Enormous wealth and gruesome poverty and squalor exist side by side, suggesting that society has lost its sense of moral and economic priorities. The ruling elite no longer cares for the welfare of the population it rules, and may be divided within itself.
- A consensual morality and sense of trust has broken down, criminality increases, and the ruling elite has lost its legitimacy in the eyes of the people, so that it can maintain power only by the crudest of methods (violence, propaganda, and intimidation whereby people are cowed into submission).
- A regression occurs to the ideas, values, and practices of an earlier period of human history, which may involve the treatment of other people as less than human.
- The society "fouls its own nest" in the sense of undermining the very conditions of its own reproductionReproduction (economics)In Marxian economics, economic reproduction refers to recurrent processes by which the initial conditions necessary for economic activity to occur are constantly re-created...
.
Marxian scholars such as Ernest Mandel
Ernest Mandel
Ernest Ezra Mandel, also known by various pseudonyms such as Ernest Germain, Pierre Gousset, Henri Vallin, Walter , was a revolutionary Marxist theorist.-Life:...
argued this condition typically involves a stalemate in the balance of power between social classes, none of which is really able to assert its dominance, and thus able to implement a constructive programme of action that would ensure real social progress and benefit the whole population. According to Herbert Marcuse
Herbert Marcuse
Herbert Marcuse was a German Jewish philosopher, sociologist and political theorist, associated with the Frankfurt School of critical theory...
, a society is "sick" if its basic institutions and relationships are such that they make it impossible to use resources for the optimal development of human existence.
However, there is a lot of controversy among historians and politicians about the existence and nature of decadence, because value judgements and biases about the meaning of human progress are usually involved. In different periods of history, people have defined decadence
Decadence
Decadence can refer to a personal trait, or to the state of a society . Used to describe a person's lifestyle. Concise Oxford Dictionary: "a luxurious self-indulgence"...
in very different ways. For example, hedonism
Hedonism
Hedonism is a school of thought which argues that pleasure is the only intrinsic good. In very simple terms, a hedonist strives to maximize net pleasure .-Etymology:The name derives from the Greek word for "delight" ....
is not necessarily decadent; it is decadent only within a certain context. Thus, accusations of decadence may be made which only reflect a certain moral feeling of social classes, not a true objective
Objectivity (philosophy)
Objectivity is a central philosophical concept which has been variously defined by sources. A proposition is generally considered to be objectively true when its truth conditions are met and are "mind-independent"—that is, not met by the judgment of a conscious entity or subject.- Objectivism...
reality.
Basic criticisms
- At the simplest level, it is argued that in trade, one man's gain is another man's loss; so if we subtracted total losses from total gains, the result would be zero. So how, then, can there be any surplus, other than goods which fail to be traded? It is not difficult to show that the gains and losses may not balance out, leading to economic crises, but many arguments have been given to show that there are only "coincidental" or "temporary" surpluses of some kind. Yet, peculiarly, even on a crude estimate of value addedValue addedIn economics, the difference between the sale price and the production cost of a product is the value added per unit. Summing value added per unit over all units sold is total value added. Total value added is equivalent to Revenue less Outside Purchases...
, the Gross OutputGross OutputGross output is an economic concept used in national accounts such as the United Nations System of National Accounts and the US National Income and Product Accounts...
value of production equals more than the value of labour and materials costs. If a surplus does not exist, it becomes difficult to explain how economic growth (the growth of output) can occur, and why there was more to distribute than there previously was (see surplus-value). Somehow, more comes out of production than went into it.
- The denial that a surplus product exists, therefore tends to focus more on the exact definition of it, i.e. "surplus" in relation to what exactly? For example, is undistributed profit really a "surplus", or is it a cost of production? Some ecologists also argue that we should produce no more than we really need, in an ecologically responsible way. This raises the question of how we can objectively know whether something is really "surplus" or not — at best we can say that something is surplus relative to a given set of verifiable human needs, conditions, uses or requirements. In this sense, Siegfried Haas argues for example that surplus is the quantity of natural and produced goods that remains in a society after a year (or other defined time period) when basic biological needs are met and social or religious obligations are fulfilled. Anthropologist Estellie Smith defines the surplus as "the retained resources of production minus consumption" or as ""material and non-material resources in excess of what is culturally defined as the current optimum supply".
- Another type of criticism is that the very notion of surplus product is purely relative and circumstantial, or even subjective, because any person can regard something as a 'surplus' if he has command or effective control over it, and is in a position where he can use it in whatever manner he thinks appropriate - even although others would not regard it as "surplus" at all. In this sense, it might appear as though the concept of "surplus product" is primarily a moral concept referring to a propensity of human beings "to reap where they did not sow", whether criminally/immorally, with a legally tolerated justification, or by asserting brute power.
Advanced criticisms
- A different sort of problem is, that the broad division of the annual new social product in net terms, into consumer items and investment items, does not directly map onto the value of costs and revenues generated in producing it. From the social point of view, accounting for what is a "cost" and what represents an "income" is always somewhat controversial, since the costs incurred by some correspond to the income receipts of others. The exact procedures adopted for "grossing and netting" flows of income, expenditures and products always reflect a theory or interpretation of the social character of the economy. Thus, the categories used may not accurately reflect the real relationships involved.
- The Cambridge economist Piero SraffaPiero SraffaPiero Sraffa was an influential Italian economist whose book Production of Commodities by Means of Commodities is taken as founding the Neo-Ricardian school of Economics.- Early life :...
returned to the classical economic meaning of "surplus", but his concept differs from Marx's in at least three important ways: (1) The substance of Sraffa's surplus is not a claim on the surplus labourSurplus labourSurplus labour is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker . According to Marxian economics, surplus labour is usually "unpaid labour"...
of others but a physical surplus, i.e. the value of physical output less the value of physical inputs used up to produce it, in abstraction from price changes (roughly, like a "standard valuation" in national accounts); (2) The magnitude of the surplus in Sraffa's model is exclusively technologically determined by the physical replacement requirements of the economy, and not by power or class relationships - so that the more efficient the economy becomes, the more surplus is created; (3) The form of Sraffa's surplus includes both the gross profit component and the value of goods and services consumed by workers, so that the distribution of the physical surplus between capitalists and workers occurs after a fixed quantity of surplus has already been produced. In a joint work, Paul BaranPaul BaranPaul Baran was a Polish American engineer who was a pioneer in the development of computer networks.He invented packet switching techniques, and went on to start several companies and develop other technologies that are an essential part of the Internet and other modern digital...
and Paul SweezyPaul SweezyPaul Marlor Sweezy was a Marxist economist, political activist, publisher, and founding editor of the long-running magazine Monthly Review...
follow Sraffa and define the economic surplus as "the difference between what a society produces and the costs of producing it". Marxists have often replied that this view of the matter just stays at the level of double-entry bookkeeping (where the uses of funds balance against the sources of funds), among other things because it makes the surplus simply a component of value-added in double-entry accounting terms. The "accounting point of view" itself is never questioned because, in an effort to make concepts "scientifically more exact", accounting methods are inevitably used.
- The existence of a surplus product usually involves power relations among people, who assert what is surplus and what is not, in a perpetual contest over how the social product of their labor ought to be divided up and distributed. In this context, Randall H. McGuire, a Marxist archaeologist, emphasizes that:
Anthropologist Robert L. Carneiro
Robert L. Carneiro
Robert Leonard Carneiro is a prominent American anthropologist and curator of the American Museum of Natural History. Carneiro earned a Ph.D. from the University of Michigan in 1957....
also comments:
Karl Marx versus Adam Smith
In Marx's own view, commercial trade powerfully stimulated the growth of a surplus product, not because the surplus is itself generated by trade, or because trade itself creates wealth (wealth has to be produced before it can be distributed or transferred through trade), but rather because the final purpose of such trade is capital accumulationCapital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
, i.e. because the aim of commercial trade is to grow richer out of it, to accumulate wealth. This can ultimately only occur, if the total stock of assets available for distribution itself grows, as a result of more being produced than existed before. The more surplus there is, the more there is that can be appropriated and traded in order to make money out of it. If people just consume what they produce themselves, other people cannot get rich from that.
Thus, because the accumulation of capital normally stimulates the growth of the productive forces
Productive forces
Productive forces, "productive powers" or "forces of production" [in German, Produktivkräfte] is a central idea in Marxism and historical materialism....
, this has the effect that the size of the surplus product which can be traded will normally grow also. The more the trading network then expands, the more complex and specialized the division of labour
Division of labour
Division of labour is the specialisation of cooperative labour in specific, circumscribed tasks and likeroles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialisation...
will become, and the more products people will produce which are surplus to their own requirements. Gradually, the old system of subsistence production is completely destroyed and replaced with commercial production, which means that people must then necessarily trade in order to meet their needs ("market civilization"). Their labour becomes social labour, i.e. labour which produces products for others - products which they don't consume themselves.
It is, of course, also possible to amass wealth simply by taking it off other people in some way, but once this appropriation has occurred, the source of additional wealth vanishes, and the original owners are no longer so motivated to produce surpluses, simply because they know their products will be taken off them (they no longer reap the rewards of their own production, in which case the only way to extract more wealth from them is by forcing them to produce more). It's like killing the goose that lays the golden egg.
In The Wealth of Nations Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
had already recognized the central importance of the division of labour for economic growth, on the ground that it increased productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
("industriousness" or "efficiency"), but, Marx suggests, Smith failed to theorize clearly why the division of labour stimulated economic growth.
- From the fact that an efficient division of labour existed between producers, no particular method of distributing different products among producers necessarily followed. In principle, given a division of labour, products could be distributed in all kinds of ways - market trade being only one way - and how it was done just depended on how claims to property happened to be organised and enforced using the available technologies. Economic growth wasn't a logically necessary effect of the division of labour, because it all depended on what was done with the new wealth being shared out by the producers, and how it was shared out. All kinds of distributive norms could be applied, with different effects on wealth creation.
- Smith confused the technical division of work tasks between co-operatively organized producers, to make production more efficient, with the system of property rights defining the social division of labour between different social classes, where one class could claim the surplus product from the surplus labourSurplus labourSurplus labour is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker . According to Marxian economics, surplus labour is usually "unpaid labour"...
of another class because it owned or controlled the means of productionMeans of productionMeans of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
. In other words, the essential point was that the social division of labour powerfully promoted the production of surpluses which could be alienated from the producers and appropriated, and those who had control over this division of labour in fact promoted specific ways of organizing production and trade precisely for this purpose - and not necessarily at all to make production "more efficient". - Smith's theoretical omissions paved the way for the illusion that market trade itself generates economic growth, the effect of that being that the real relationship between the production and distribution of wealth became a mystery. According to Marx, this effect in economic theory was not accidental; it served an ideological justifying purpose, namely to reinforce the idea that only market expansion can be beneficial for economic growth. In fact, the argument becomes rather tautological, i.e. market expansion is thought to be "what you mean" by economic growth. The logical corollary of such an idea was, that all production should ideally be organized as market-oriented production, so that all are motivated to produce more for the purpose of gaining wealth. The real aim behind the justification however was the private accumulation of capital by the owners of property, which depended on the social production of a surplus product by others who lacked sufficient assets to live on. In other words, the justification reflected that market expansion was normally the main legally sanctioned means in capitalist society by which more wealth produced by others could be appropriated, and that for this purpose any other form of producing and distributing products should be rejected. Economic developmentEconomic developmentEconomic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...
then became a question of how private property rights could be established everywhere, so that markets could expand (see also primitive accumulation). This view of the matter, according to Marx, explained precisely why the concept of the social surplus product had vanished from official economic theory in the mid-19th century - after all, this concept raised the difficult political and juridical question of what entitles some to appropriate the labour and products of others. Markets were henceforth justified with the simple idea that even if some might gain more than others from market trade, all stood to gain from it; and if they didn't gain something, they would not trade. Marx's reply to that was essentially that most people were in a position where they necessarily had to trade, because if they didn't, they would perish - without having much control over the terms of trade.
See also
- surplus labourSurplus labourSurplus labour is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker . According to Marxian economics, surplus labour is usually "unpaid labour"...
- surplus valueSurplus valueSurplus value is a concept used famously by Karl Marx in his critique of political economy. Although Marx did not himself invent the term, he developed the concept...
- economic surplusEconomic surplusIn mainstream economics, economic surplus refers to two related quantities. Consumer surplus or consumers' surplus is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay...
- operating surplusOperating surplusOperating surplus is an accounting concept used in national accounts statistics Operating surplus is an accounting concept used in national accounts statistics Operating surplus is an accounting concept used in national accounts statistics (such as United Nations System of National Accounts (UNSNA)...
- rate of exploitation
- capital accumulationCapital accumulationThe accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
- labour theory of value
- value productValue productThe value product is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies...
- productive and unproductive labourProductive and unproductive labourProductive and unproductive labour were concepts used in classical political economy mainly in the 18th and 19th century, which survive today to some extent in modern management discussions, economic sociology and Marxist or Marxian economic analysis...
- unproductive labour in economic theoryUnproductive labour in economic theoryUnproductive labour is labour which does not further the end of the system. Therefore this concept has sense only with reference to a determined system. In classical economics the end is growth and development, in Marxian economics the end is capitalistic profit and in business the end is to place...