When people complain that they are “being exploited” at work they usually mean that they are being treated unfairly or being ripped off. There are plenty of ruthless entrepreneurs around who make a quick fortune by refusing to pay wages due, making illegal deductions from the pay packet, forcing staff to work unpaid overtime and so on.
Burger King bosses used to force their staff to clock off whenever custom was slack. The 21 Chinese cockle pickers who drowned at Morecombe Bay, were left to die by their boss. But exploitation means more than this.
Capitalism does not depend on rip offs for its survival. Capitalism lives and breathes because it is a system that generates profits (surplus value). Once they have invested their money (capital) into materials, machinery and manpower, bosses sell the resulting products for more than they laid out in the first place. The creation of this surplus is what Marxists mean by exploitation.
Understanding where this surplus comes from was a task that taxed the brains of economists in the eighteenth and nineteenth centuries. To find the answer they had to change their understanding of the nature of labour itself.
Economists had long asked themselves the question: how is the value of goods determined?
Real advance was only made when economist William Petty first outlined a labour theory of value in 1662. He put it this way:
“If a man can bring to London an ounce of silver out of the earth in Peru, in the same time that he can produce a bushel of corn, then the one is the natural price of the other.”
In short, the value of any product is determined by the amount of labour used to produce it.
Adam Smith took over this theory in the 1770s and improved it. He showed that all products exchange with each other according to the amount of labour worked up in them. But his theory hit a problem.
If labour was the only source of value, and if products of equal value exchanged with each other, how then to explain the exchange that took place between worker and capitalist?
It was obvious that the workers did not receive in wages the full value of the product of their work. Otherwise how could the capitalist make a profit? There seemed to be no equal exchange in the wage/labour relationship. So Smith decided that the theory applied only to the exchange of goods, not labour.
David Ricardo witnessed the enormous strides forward in productivity brought about by the Industrial Revolution. He argued that this was reducing the amount of time needed to produce the goods the workers lived on (food, clothes, housing etc.) and therefore the value of wages that needed to be paid to the worker. So profits emerged and could only grow at the expense of workers’ wages.
Many early socialists seized on this. They said it proved that the working class was being robbed. The slogan of the day throughout Europe in the 1830s was: “for the workers’ right to the full value of their labour.”
The hired hacks of the bosses realised that Ricardo’s theory was dangerous. One worried that it, “unhappily affords a handle to those who would represent all property as belonging to the working classes and the share which is received by others as a robbery or fraud upon them.”
So the ruling class economists spent the next twenty years rubbishing Ricardo’s theory and covering up his discoveries.
It was left to Karl Marx to build on Ricardo and Smith and solve the problem of explaining exploitation once and for all. Marx did not discover the answer until the 1850s while he was writing the first draft of Capital. He discovered that all labour had a dual character.
On the one hand, it was “useful” labour. This meant that it was very specific in type (sewing, spinning, digging etc.) and in that sense each type of concrete labour was different to every other. On the other hand, labour was “abstract” in that all different types were in fact compared to each other when their products were exchanged, by being reduced to a definite quantity of social labour.
All commodities had this dual character, including labour power itself. Previously, economists had just spoken of “labour”; now Marx distinguished between “labour” and “labour power”.
For Marx, labour power was an exchange value and its value was determined, like all other commodities, by the amount of labour needed to reproduce it. Its value was the amount of labour in the food, clothing and other basics needed to get workers back the next day ready for work (to reproduce labour power, as Marx put it).
What the capitalist bought was the capacity to work – “labour”. Just as the usefulness of a pen is that it enables you to write, the usefulness of labour is that it creates value, and uniquely among commodities, creates more value than it itself possesses.
Marx had unlocked the secret at last. His collaborator Friedrich Engels put it this way:
“In a certain time the worker will have delivered as much labour as was represented by his weekly wage. Supposing that the weekly wage of the worker represents three labour days, then if the worker begins on Monday he has by Wednesday evening replaced for the capitalist the full value of the wages paid. But does he then stop working? By no means.
The capitalist has bought his week’s labour and the worker must go on working during the last three days of the week too. This surplus labour of the worker, over and above the time necessary to replace his wage, is the source of surplus value, of profit. The value of the labour power is paid in full but this value is less than that which the capitalist can extract from the labour power, and it is precisely the difference, the unpaid labour that constitutes the share of the capitalist.”
With this discovery of the nature of “unpaid labour” exploitation is given a precise meaning: the excess value generated by workers over and above that necessary to provide for their wages.
Marx overcame the limitations of classical bourgeois political economy, and the dependence of the early socialists on Ricardo’s theories. He made socialism scientific for the first time. In doing so, he proved that exploitation is caused not just by the sharp practices of some bad capitalists, but is part and parcel of the profit system itself.