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Social Wealth vs Surplus Value

Pictures and Essays by Martin Hunt

Social Wealth vs Surplus Value
I’m reading Marx’s Capital with a reading group these days. It’s a dense book, but not that hard to grasp and has many flashes of very dry wit. It is a very painstaking analysis of how capitalist economics works and much is as valid now as it was in Marx’s day. And it’s interesting how much of his analysis has become ironically mainstream.

For instance the gold bug’s understanding of money comes straight from Marx.

This week I read his analysis of where surplus value comes from - and it’s not a surprise. Surplus value doesn’t arise in trading - from buying and selling - because the value on both sides of a trade remain constant before and after - the value is just expressed differently. First it’s a pile of cloth in the hands of A and pile of money in the hands of B Then there is a pile of money in the hands of A and a pile of cloth in the hands of B. The value of money and cloth remains the same throughout and is, by the hypothesis of trading, equal. How do you make a profit out of that?

Well - there are ways - like you can wangle a way to buy wholesale and then sell at retail but Marx shows that in the long run that all doesn’t change the picture. Trades don’t create surplus value.

What creates surplus value is paying your workers less than the value of what they produce. If you succeed in achieving a position where you can do that then you wealth starts to expand exponentially. All you need to do to get richer and richer is invest the surplus value in resources that let you hire more and more workers.

Now note: I’m not saying that trade is unimportant in this process - that which is made must be traded for this to work - all I’m saying is that trading is not the source of surplus value. Paying your workers less than the value of what they produce is the source of surplus value.

Reading Marx makes me realize how much he’s talking about a different world from ours for one thing, and how his thinking perpetuates that old world view. It’s a world view based on scarcity - where it’s natural for workers to be exploited into producing surplus value because they have to have jobs. And also where everyone has to work really hard all the time to produce what we all need to survive. Marx dimly saw that increasing productive capacity would eventually lead to the fundamental problem of present capitalist society - overproduction.

His idea of surplus value still works, but it’s importance is very greatly reduced in our present context of automated factories that can run for months at a time without human intervention. They are called “lights out” factories because without people they don’t need light or heat. And wanna know what those factories make? Robots. What is the meaning of surplus value or even earning in a context like that?

I think a more useful concept these days is “social wealth”. This recognizes with Marx that the source of value is the work of people - but there is an added element. The effectiveness of work isn’t measured by the amount of energy your muscles use doing it. It’s measured by the output of your effort. If a day’s work as a bare person living in the woods gets you through to the next day - that’s a sort of base measure of the effectiveness of work. But if you live in a society that gives you access to tools and teamwork then the effectiveness of your work increases. A team of hunters can bring in more food than they can eat. A person with an axe made by others can both survive to the next day AND build a house. The wealth produced by that increase in the effectiveness of work is what I call social wealth.

I think of social wealth as wealth owned by society because it would not exist unless society did - it’s just like if I’m entitled to value if I create value so is society. Clearly if you work at minimum wage the amount of social wealth your work produces is very little. Basically - at minimum wage your work just produces enough to get you through to tomorrow - like the beasts in the forest. Not much social wealth involved.

But if you spend your day wheeling and dealing real estate and making a million bucks there is a lot of social wealth involved. There is no way for anyone to make a million bucks without society being involved.

The conceptual point about social wealth is that it is there because of society - and society is entitled to a share because of that. Society has expenses that have to be covered if things like roads and schools and hospitals are to be provided; not to mention police and courts and legislatures. It needs to spend it’s wealth for social projects. And social wealth is huge and it’s growing.

There is a problem though - there are a lot of people who don’t want to acknowledge their debt to society in the wealth they hold. They just want to take the money and run. Society now claims it’s share of social wealth via taxation: In this view taxation is collecting a debt owed. And it’s a bit problematic that men with guns are resisting paying that debt. Those men with guns are like that nutty rancher who has been grazing his herds on public lands for decades and refuses to pay the fees. He’s proud of how many guns he has to fight off those trying to make him pay what he owes. Maybe we should show him what it’s really like when you piss off men with guns. Have a drone blow up his house and send him a bill for the bomb. But of course, America would never do that.