The third in Mary Marcy’s 1910-11 series on Marxist economics which formed the basis of her ‘Shop Talks on Economics.’ Part one here, and two here, three here.
‘Beginners Course in Socialism and the Economics of Karl Marx: Part IV: How Profits are Made’ by Mary E. Marcy from International Socialist Review. Vol. 11 No. 8. February, 1911.
How Profits are Made.
Many of us have been accustomed to think that profits are made from graft, from special privileges or from monopoly. We have talked so much of the thieving among capitalists that we have altogether overlooked the great, main method of profit taking.
As Marx says, if you cannot explain profits on the supposition that commodities exchange at their values, you cannot explain them at all.
And so we shall assume (as in truth they generally do) that commodities on the average, exchange at their value.
Suppose that it takes two hours of necessary labor to produce the necessaries of life for a workingman–or, in other words, two hours of labor a day to produce laboring-power.
Suppose too (as is very likely the case), that $2.00 in gold represents two hours of labor.
Now the value of labor-power (which the workingman sells) is determined (as the value of all commodities are determined), by the social labor contained in it. It is represented by the necessities of life, produced by two hours of necessary labor a day.
If the workman sells his labor-power at its value, he will receive in return a commodity containing two hours of necessary social labor. In the case we mention above, he would receive $2.00 a day.
In other words, a day’s labor-power represents two hours of labor, embodied in the food, clothing and shelter that produce it, just as the two dollars in gold (or an equivalent) represent two hours of necessary labor. The labor-power is equal in value to the value of the $2.00 in gold. The workman has sold his labor-power at its value.
The workman receives enough ($2.00) in wages to eat, drink, to rest and clothe himself–enough to produce more labor-power. He receives the value of his labor-power.
But wage laborers sell their laboring-power to the bosses by the day or by the week, at so many hours a day. The capitalist buys the commodity (labor-power), paying for it at its value. If the wage worker is a miner, in two hours he will dig coal equal in value to his wage of $2.00 a day. The coal he digs will contain two hours of labor just as the two dollars in gold contain two hours of labor and as the necessaries for which he exchanges his two dollars, contain two hours of labor.
In other words, in two hours (of necessary labor) the miner would have produced value in coal equal to the value of his wages (or his laboring-power). But he sells his labor-power by the day or week and the boss prolongs the hours of work as far as possible.
In two hours, however, the miner has produced enough value to pay his own wages, but the boss, having bought the laboring-power by the day, may be able to make the wage-worker work ten hours daily. The miner needs only to work two hours to produce a value of $2.00 to reproduce his labor-power. As Marx would say:
He must daily reproduce a value of $2.00 (which he will do in two hours), to daily reproduce his labor-power.
But when he sells his laboring-power to the boss the boss acquires the right to use his labor-power the entire day–as many hours as the worker’s physical endurance will permit.
If he forces the miner to work ten hours daily, the workingman will be laboring eight hours beyond the time necessary to pay his own wages (or value of his labor-power). These eight hours of surplus labor are embodied in a surplus value or a surplus product.
In two hours the miner produces in coal value sufficient to pay for his labor-power, but in the eight succeeding hours of labor, he will produce coal valuing $8.00, all of which the capitalist retains for himself.
Since the miner sold his laboring-power to the capitalist, the coal, or value the miner produces, belongs to the capitalist.
Thus the capitalist spends $2.00 a day in wages (or two hours of labor) and acquires coal, or other commodities, equal to $10.00 (err ten hours of labor). Thus come profits.
Year after year the capitalists buy labor-power, paying for it at its value (in the case of the miner at $2.00 a day). The capitalists own the products of the workers–equalling ten hours of labor. They exchange a commodity (gold, or money), containing two hours of labor for labor-power (containing two hours of necessary labor-represented by the necessities of life). But when the miner goes home at night the capitalists find themselves owners of the coal he has dug, which contains ten hours of labor.
Coal (representing ten hours of labor) will exchange for gold (or money) containing ten hours of labor; in this case for $10.00. The miner has produced $10.00 worth of coal. He received $2.00.
The eight hours of value, or $8.00 worth of coal, which the capitalists appropriate, is surplus value, for which they give no equivalent.
“It is this sort of exchange between capital and labor upon which capitalistic production, or the wages system, is founded, and which must constantly result in reproducing the workingman as workingman and the capitalist as a capitalist.
“The rate of surplus value, all other circumstances remaining the same, will depend on the proportion between that part of the working day necessary to reproduce the value of the laboring-power and the surplus time or surplus labor performed for the capitalist. It will, therefore, depend on the ratio in which the working day is prolonged over and above that extent, by working which the working man would only reproduce the value of his laboring-power or replace his wages.” (Page 81, Value, Price and Profit, by Karl Marx.)
The capitalist owns the product of his wage-worker. When he sells this product he disposes of commodities a part of which have cost him absolutely nothing, although they have cost his workman labor.
It is easy to see how the miner received the value of his laboring-power; $2.00 gold contain two hours of labor, $2.00 exchange for–or will buy–the necessaries of life (produced by two hours of labor) which will enable the miner to produce more labor-power for the next day’s work.
In this case the miner’s product, the coal he digs in one day, contains five times the quantity of labor needed to produce the necessaries of life, which produce, in him, more strength or more labor-power.
For the things he gets for his labor-power contain only two hours of labor, while the things he produces, and which are claimed by the capitalist, contain ten hours of labor.
The miner sells his labor-power and, naturally, the capitalist desires to use it as profitably (for himself) as possible. If the wage-worker demanded commodities in exchange for his products, containing an equal quantity of labor, he would no longer be a wage-worker, for capitalists mould no longer employ him. There would be nothing–no surplus value–left for the capitalists.
But men and women who have nothing to sell but their labor-power have no choice in the matter. They are compelled to sell their strength or labor-power in order to get wages to live. Capitalists, on the other hand, employ them for the sole purpose of taking profits. Capitalists are forced to give the working class enough to live and work on, but they try by every means at their command to prolong the working day into ten, or even twelve hours, in order that more surplus products, or surplus value, may remain for themselves.
But intelligent workmen and women are not content with selling their laboring-power at its value. They are coming more and more to demand the value of their products. We are growing weary of being mere commodities, compelled to sell ourselves, for wages at the regular “market price.” We are weary of receiving a product of two hours of labor for products containing ten hours of our labor. We are tired of living on meagre wages while we pile up millions for the capitalist class.
This is the chief demand of socialism; that workingmen and women cease selling themselves, or their strength, as commodities. We propose to own the commodities we produce ourselves and to exchange commodities containing a certain quantity of necessary social labor, for other commodities representing an equal quantity of necessary social labor.
You and I work for the boss because he owns the factory or mine or railroad or the mill. Ownership of the means of production and distribution (the factories, land, mines, mills–the machinery that produces things) makes masters of capitalists and wage-workers of you and me.
Socialists propose the ownership, in common, of the mines, mills, factories and land, of all the productive industries, by the workers of the world.
When you and I and our comrades own the factory in which we work, we will no longer need to turn over to anybody the commodities we have produced. We shall be joint owners of the things we have made socially. We shall demand labor for labor in the exchange of commodities. This is the kernel of socialism. It proposes to make men and women of us instead of commodities to be bought and sold upon the cheapest market as men buy shoes or cows.
In the illustrations given above, can the mine owner pay the mineworkers the value of their labor-power and still make a profit? Can the mine owners sell coal at its value and pay the mine-workers the value of their labor-power and still make a profit?
Would it be possible for the mine owners to pay the mineworkers MORE than the value of their labor-power and to sell the coal at less than its value, and still make a profit? Explain why this would be possible.
If the wage-workers should become strong enough to demand the value of their products what would happen? Would there be any surplus left for the capitalist class? Explain why not.
What becomes of the difference between the value of your labor-power and the value of the things you produce in the factory or mine?
Suppose you are working in a California mine and earning $3.00 a day, which is sufficient to buy food, clothing and shelter IN CALIFORNIA, enough to produce your labor-power. Suppose your employer wants to send you, and some of your California comrades to work in his mines in Alaska. The value of the necessities of life are far more in Alaska than they are in California. It requires $6.00 a day to buy food, clothing and shelter (to produce LABOR-POWER) in Alaska.
Will you be able to save any more money in Alaska at $6.00 a day than you would in California at $3.00 a day? Why not? Who pays the difference in the high prices of the necessities of life? YOU or YOUR BOSS? (We are not speaking of individual cases, but of high prices charged for food, etc., in general.)
Of course, we all know that the working class produce all exchange value. We make all commodities, but as we have sold our labor-power to the boss, our products belong to HIM. So the boss pays for nearly everything, because he has appropriated the things we have made.
When the value of the necessities of life RISE, does the working class or the capitalist CLASS pay the bill? In the case of our mining jobs in Alaska, do WE pay $6.00 for our board, clothes and room, or does the $3.00 increase in OUR cost of living FALL ON THE CAPITALIST?
The International Socialist Review (ISR) was published monthly in Chicago from 1900 until 1918 by Charles H. Kerr and critically loyal to the Socialist Party of America. It is one of the essential publications in U.S. left history. During the editorship of A.M. Simons it was largely theoretical and moderate. In 1908, Charles H. Kerr took over as editor with strong influence from Mary E Marcy. The magazine became the foremost proponent of the SP’s left wing growing to tens of thousands of subscribers. It remained revolutionary in outlook and anti-militarist during World War One. It liberally used photographs and images, with news, theory, arts and organizing in its pages. It articles, reports and essays are an invaluable record of the U.S. class struggle and the development of Marxism in the decades before the Soviet experience. It was closed down in government repression in 1918.
PDF of full issue: https://www.marxists.org/history/usa/pubs/isr/v11n08-feb-1911-ISR-gog-Corn-OCR.pdf