Karl Marx was a German social philosopher, born in 1818, the chief theorist of modern socialism and communism. He was the most influential socialist thinker to emerge in the nineteenth century. Although he was ignored during his lifetime by thinkers and scholars, but his ideas on economics, sociology and politics gained acceptance after his death. He became more famous after his death than he was in his lifetime. This could be due to the delayed publication of his works. Marx’s one of the influential works was on the Capitalist Society, Capital 1867.
In Capital he analysed the capital process of production and elaborated on his version of labour theory value and the conception of surplus value and exploitation of labour in a capitalistic society. Capitalism is a class society, in which the domination of the capitalist class or the bourgeoisie is founded upon its ownership and control of the vast bulk of the society’s means of production. According to Marx, capitalism is a system of universal commodity production where even labour power is a commodity. In a capitalistic society, economic power dictates politics and culture.
People who own the means of production dictates the people who does not own the means. Everyone fights for their survival and for the people who does not own any means of production, their only survival is through working for those who owns the means of production. The factories and the offices in which the labour works are controlled by the capitalist. As back in history, feudal lords used to own the land, slave lords owned slaves, similarly in modern times, capital class or the capitalist owns shares in the means of production all starting with the ownership of money.
Marx argues that the people who owns the means of production exploit people who doesn’t owns any means. Exploitation is a key organizing principle of capitalism. Capitalist exploitation is determined at the social level and it is mediated by the market-led distribution of labour and its products. Marx defines exploitation as the difference between the value produced by the labour and the value of labour power. In other words, exploitation for Marx is the surplus value of labour.
Exploitation extracts the surplus value from labour and accumulates for the capitalist. It is a relationship of unequal distribution between the capitalists and the labour, and the benefiting of the capitalist class at the expense of the working class. According to Marx, the exploitation did not arose through individual situations but instead resulted from capitalist system, very logically and independently from individual intention. Marx believed that capitalists were ‘withholding from workers the just fruits of their labour’.
He argued that more than the raw materials it was the skills of the workers which went into the making of the goods and made it possess its value. In capitalism dominant class maintains itself by controlling a process through which the subordinate classes are required to devote a portion of their working time to the production of things needed by the ruling class. Therefore the social division of labour within a class society must be structured around the extraction of the surplus labour.
Just due to some one having material wealth from there ancestors, does not allow them to rule the people who have not been materially blessed in this world. In fact if we analyse the material wealth of these people, it is directly linked to the conditions of the workers. For instance, more accumulation of profits when a business can hire cheap labour or make them work more without paying them more. He referred to this exploitation by the bourgeoisie of the proletariats as a conflict which would someday result in the downfall of capitalism.
According to Marx, the general social condition for the reproduction of the relations between the capitalists and the working class, is that the working class as a whole will be induced to perform surplus labour, because it is this surplus labour which forms the basis of the capitalist profit and this capitalist profit which in turn keeps the capitalist class willing and able to reemploy workers. The worker and the capitalist meet in the market with their “goods”. The worker comes with labour-power and the capitalist with money (as well as with the commodities which he sells).
With his money, the capitalist buys means of production, which include instruments of production and raw materials, and labour-power. We may assume that equivalent is exchanged for equivalent. By consuming his newly bought commodities – in other words, by setting the labourer to work with the means of production – the capitalist initiates the production of value. It follows from the definition of value, that the value of the commodities produced in this process of “productive consumption” is the sum of the values of the means of production used up plus the labour-time.
If the worker works (per day) more than the amount of time which is the value of a days worth of labour-power, then the capitalist will possess, by the end of the productive process, more value than he did when he got to the market. This additional value that the capitalist ends up with is what Marx calls surplus-value. Marx talks about two kinds of surplus value in his book Capital 1867, Relative and absolute surplus value. Relative surplus value exploitation occurs when the labour is paid a tiny portion of the goods they produce but is enough for the labour to survive.
On the other hand, absolute surplus exploitation occurs when the labourers are forced to work more and are paid much less than to survive a normal life. For understanding simple exploitation according to Marx, we now look at a simple real life example. According to UNITE, research department of American textile workers union, if an American woman spends $100 on a dress, $54 goes to the shop owner, $18 for the materials, $12 as labour wages and $16 as factory overheads. In Marxist terms, $18 and $16 are constant capital while $12 is variable capital. The surplus value in this case is $54.
The rate of exploitation is the surplus value divided by the labour value used to make that dress. The calculation turns out to be 450% as the rate of exploitation. In a market economy everything is swapped around with money. The capitalist comes along with money hires the worker and puts her to work. He can do this because the worker has no independent access to the means of production, owned by the capitalist class as a whole. The worker is paid a sum of money, enough to keep body and soul together at whatever had become the normal standard of living for workers in that society.
For workers in an advanced capitalist country that standard might be quite high by historic standards – a nice house full of electronic kit, a car in the driveway and a freezer full of food. But however much living standards may have improved over time and in the course of struggle, the gap between workers and capitalists in the age of Bill Gates is more than it ever was before. In a market of perfect competition, it is well known that the economic profit in the long run is zero. Based on this conclusion, it can be interpreted that no exploitation occurs between a capitalist and the workers in perfect competition.
This implies that not only the class but also the competition determine whether exploitation exists. Certainly, in reality perfect competition will never come true. But what Marx did not considered in his theory of exploitation was the efforts of the capitalists and the marketing and sales personnel. We know that just making the goods and putting them into the warehouse will not produce a sale. There has to be some kind of effort in order to make your goods sale. Through the theory of surplus value, Marx believed that he had identified the source of profit in the capitalistic production.
Clearly the surplus value is not the profit. , since the goods have to be sold on the market, with inevitable costs of distribution, advertising, administration and so on. Moreover, the goods may not fetch the desired price or even may not be sold. Marx also does not considers is the use of machinery in the process of production. Through technology, less labour is required and due to heavy mechanization cost is low. But we cannot take the machineries, marketing and advertising costs for granted. They are as much important as the production of goods itself. Actually they both are interdependent.
Capitalist should therefore be rewarded for his investment of machineries, his risk in the business and his money tied up in the business as working capital. Exploitation by the capitalist class still takes place even in the 21st century, where people are thought to have improved their standards of life drastically from the time of Marx. Some of the shocking and bizarre examples of exploitation in the 21st century are as follows: Relative exploitation: L. V Myles and Co in Haiti makes PJ suits for Disney. Disney sells these PJ suits in US shops for $11. 97. 20 workers produce around 1000 PJs per day.
Daily value of the output produced is $11,970. On the other hand the daily wages of the 20 workers amount to be only $66. 40, which means $3. 32 per worker per day. The worker gets approx 0. 0055% of their outputs retail value. Sung Hwa Corp in Indonesia, makes shoes for Nike. Nike retails its shoes in US for $75. Approx each worker produces 14 pairs per day with a output value of $1050 per day. In return the workers get $1. 03 a day or $0. 14 per hour with a nail-biting, back breaking 70 hours work per week. Wages as a percentage of output value is 0. 001%.
Now we will look at the absolute exploitation: Nike pays $1. 03 per day to it shoes producing workers. According to the Indonesian government, this wage is not sufficient for a normal living expenses. ILO estimated that 80% of low-paid Indonesian working women are malnourished. In Salvadoran textile mills, workers are paid $0. 60/hr or $4. 80 per day. Basic necessities cost around $5. 14 per day. Therefore the pay covers only 93% of the basic needs to survive and we can imagine the conditions for survival. Every year the ‘Financial Times’ publishes its ‘Global 500’, it lists of the biggest companies in the world.
Businesses are ranked by market capitalization, which basically means total share price. In 2001 the biggest firm was General Electric. General Electric is a conglomerate with a finger in all sorts of pies – though not, these days, electricity. Its market capitalization comes to $474,955 million. Its sales were $110,832 million, but profits were higher than Microsoft’s at $15,942 million. Capital employed was again greater at $119,198 million. In many ways General Electric is more typical of the biggest business. It employs 340,000 workers.
In fact if you were to rank big business by the number of workers Wal-Mart would come top with 1,140,000 on the payroll. Jack Welch was the Chief Executive Officer of General Electric till he retired last year. He must have worked very hard. He collected $40 million in remuneration in 1997. Jack therefore got 1,400 times as much as the average blue-collar GE worker in the US. One reason the firm gave him so much is that he saved the owners (the shareholders) lots of money. He saved money by sacking loyal American operatives and ‘downsizing’ work to Mexico. Jack earned 9,571 times as much as the average Mexican employee.
But don’t get the idea Jack is basically on a wage. Most of his wedge came from stock options – the right to buy the company’s shares. In the roaring stock market of the 1990s it was a one-way bet for the rich. Chief Executive Officers got 85 times as much as the rest of the workforce in 1990. By 1999 it was 475 times as much, and stock options were the crowbar opening up the gap between rich and poor. In 1979 the top 1% were hanging on to 20. 5% of American income. Twenty years later it’s over 40%. In 2000 the biggest firm was Microsoft, with a market capitalization of $586,196 million.
That is nearly $600 billion! Microsoft’s turnover (sales) was $19,747 million in 1999. Its pre-tax profit was $11,891 million. The figure for capital employed was $24,438 million. It should be explained that share capitalization is an assessment of expected future profitability of the company, for that is what speculators are interested in when they buy the shares. It is not a stock take of the assets. Most of the assets of Microsoft are in any case intangible. They are monopoly rights to intellectual property, like the Windows system itself, rights jealously guarded by high-paid lawyers.
Microsoft employs ‘only’ 31,000 workers – we know how the firm operates realize that plenty more are subcontracted into the global ‘team’. The great question of our age is how these gigantic corporations got rich and stay rich at the expense of the rest of us. That question is answered by Marxist economics. These days the means of production are owned in the form of shares. Even Bill Gates, the world’s richest man, is not the sole owner of Microsoft, though he is reckoned to have a controlling interest in the company. But General Electric is more typical in this respect.
No one shareholder owns more than a tiny fraction of the total stock – remember we’re talking about almost $500 billion. What does this show? It shows how capital has accumulated. Big business has grown enormously since the time of Marx, when most firms were family-owned. Today some 7% of the world population controls the 85% of the world wealth. Capitalism is an anarchic, crisis ridden system. Behind the backs of the marketing executives stalk market forces that are as unpredictable as the weather. Three times in the last 30 years big world economic crises have destroyed profit rates across entire industries.
Car factories have closed down, mines and shipyards have closed down, and even supermarkets – all because their owners could not make a profit. If capitalism was a nice, easygoing system where every capitalist produced a profit every year this would not matter so much. But it is not. Although Capitalism is prone to crisis it is not a system which is created in such a way that it will breakdown. Karl Marx and his followers have theorized that intensive capitalist growth contains the seeds of its own destruction, and therefore capitalism must conquer new global markets or collapse.
But all theories tracing the demise of capitalism to its own dynamics – for example, the substitution of un-exploitable “dead” labour for exploitable “living” labour, or overproduction as restraints on wages prevent consumer demand from keeping pace with the growth of productive potential — have been proved theoretically and empirically bankrupt. Unfortunately capitalism does not destroy itself. Instead it destroys the natural environment, degrades the lives of the exploited majority, and even warps the lives of those who exploit them, all the while spinning a myth that commercialism is both inevitable and superior to all other ways of life.
Unfortunately corporate dominated globalization will not stop creating more environmental destruction and human misery until those negatively affected combine to prevent it from doing so. Even capitalistic system being a system prone to crisis, it will not demise until the working class wants to end this. This means that the masses have to reunite and to bring a new revolution in order to fight this brutal capitalistic society. People who owns the 85% of the world wealth have taken a tight grip on the world’s political and cultural powers.
They have even bought the governments of the small third world countries so that they do not revolt against them. Its just a big political game played by these capitalists in order to benefit them from unlimited access to huge profits and to become more powerful than ever. If one group of working class in Pakistan refuse to work for these capitalists, it wont bother the capitalists as they will turn to China, Indonesia, India and other countries where there is cheap labour.
Therefore it is necessary for everyone to reunite and form a global platform for the working class. Another reason why the exploitation of labour will not bring the fall of the capitalism is because today, the working class is so far way from the capitalists that, we would need to work harder and increase our wealth for next 100 years so that we have enough to fight, but the fast technological changes will not allow it even for the next 300 years.
For instance, if today, for starting a factory you need $500,000 , then after 40-50 years u would need $1 million due to technological changes, interest-based banking system and the powerful media exposure. The machineries you can buy today wont be useful tomorrow, the interest-based banking system will reduce the time value of money and the media will effect the changes in our tastes and preferences. The exploitation of labour in a capitalistic society was from the beginning and will remain till the end.
The drive for more and more abnormal profits, increase competition and world leaping towards becoming a global market are the reasons for the continuity of this brutal exploitation. But there can be a remedy to all this. It will be through proper guidance, education and the revolutionary minds to get over this problem. For sure we will see failures, but the courage to continue for success will eventually lead us to it.