If you are going to end up with more money than you started with, you are going have to create more value than you pay for in the production process. "Couldn't I just charge more for my products than it costs me to make them?" Well, not really- you are competing in the marketplace with other capitalists, all of which are trying to lower their prices to out-sell each other, you can't just raise your prices arbitrarily to create profit. Instead of worrying about prices in the marketplace you need to figure out a way to create more value in the production process than you pay for.
You have two different types of input: constant and variable capital. Constant capital inputs are incapable of creating more value. That's why we call them constant. Machines, raw materials, factories... as they are used up, these inputs pass on their value to the commodities you produce. There is no way to make them create more value than they are initially worth.
Variable capital can create more value than you pay for it. That's because variable capital is human labor. When you pay a worker to work for an hour, you have no idea how much value they are going to produce. They could work hard, or take it easy. They could be productive or unproductive. They can be cheap of expensive to hire. Everything is variable. It will be a constant struggle to figure out the best way to get the most value out of them at the least cost. Sometimes they will even resist. They're a huge pain in the ass but you're going to have to get used to them because this unique variability is what allows you to make a profit at all.
So, how exactly do you go about exploiting them?
Equation: e=s/v This equation measures the rate of exploitation. In the denominator is the money you have spent on variable capital (wages). In the nominator is the surplus that you the workers produce for you (profit). Workers will work to produce enough value to cover the money you laid out for their wages. The rest of the work the workers do is surplus value- your source of profit. Constant capital (c) is missing from the equation. Constant capital does impart it's value/cost onto the commodities as well but it cannot produce extra surplus. Your goal is to increase e. Let's look at some different strategies for doing that.
First of all, what happens if you increase both s and v? ie. hiring more workers or making the same amount of workers work longer hours. This would increase the total amount of surplus extracted but it wouldn't increase the rate at which surplus was extracted. Still, it would be more profit. Let's look at the "hiring more workers" strategy first. If all capitalists pursued this strategy, pretty soon there would be full employment- and you know what that means.... higher wages because the demand for labor is rising. Higher wages mean an increase in your denominator. Falling rate of exploitation= less profit.
Capitalists are always trying to get workers to work longer. I mean, you gotta realize that while your workers are at home sleeping and eating all of your constant capital is just sitting in an empty workplace being totally useless. At that same moment other capitalists are out there pumping out commodities. You can't let them be more efficient/productive than you!
Both of these approaches are effective in increasing the total (or absolute) surplus value extracted from workers. In times of expansion in often makes sense to increase outlays on v. But this strategy is much more powerful when combined with a tactic that changes the ratio of S to V. There are many ways to do this.
First, you could just pay the workers less, but make them do the same amount of work. This would lower V while keeping S the same, thus raising the rate of exploitation. Capitalists are always finding ways to cut wages. Is there any limit to how low you can set wages? Well, keep this in mind: workers will use their wages to buy food, clothing, housing, entertainment. etc. These things are all necessary in order to keep them alive and healthy enough to come to work each day and create a surplus for you. We call this "reproducing the worker". If you didn't pay them enough to reproduce them, they wouldn't come work for you. The standard of living changes from country to country, so you can always move production to a country where it's cheaper to reproduce the worker.
The state is quiet helpful to you in reproducing the worker. In many countries, the state and private charities usually provides a modicum of education and social services so that the poorest of the poor don't starve to death so that you don't have to pay the full cost of reproducing the worker.
The credit system performs a similar function. You don't have to pay the full cost of reproducing the worker because workers can just borrow money from banks and go into debt. Once in debt they will be even more tightly chained to the institution of wage labor.
<< Back to article
