One of Marx’s greatest achievements was to expose the precise mechanisms by which those who produce most of capitalist society’s wealth—who make the goods and perform the services—own and consume so little of it.


Under slavery, the exploitation of the slave class was open and based on the threat of brute force. Under feudalism, even the emancipated serf and peasant had to pay rent to the lord of the estate and were usually obliged to provide labour services for free.

But under capitalism, the exploitation of the working class is disguised by the wages system.Apparently, the worker freely enters into a contract with an employer to work for such-and-such a time, in return for the going rate of so much money per hour (or per item produced in the case of a piece-work payment system).

What Marx showed was that the worker is not paid in full for the work that they do—that the value of their wage is less than the value that they create while working for the employer.

In his great work Capital, he proved that the value of a commodity is determined by the amount of society’s labour time which goes into producing it.This comprises the time taken to produce all the components, raw materials, energy inputs, the wear-and-tear on tools and machinery ('depreciation') etc. together with the current labour time spent by workers in combining all these factors in the production process. Because all types of commodity can be reduced, ultimately, to this single common measure—the average amount of society's labour time necessary to produce it—this makes it possible to distinguish between the values of very different commodities.These different values are then reflected in the differing prices attached to them in the market place. Of course, other factors can also affect prices such as company efficiency (including labour productivity), scarcity or gluts, monopoly power, fashion and advertising. But generally speaking, these make a commodity's price fluctuate around its objective value.They do not determine that value as such.

The employer buys the worker's capacity to work—the worker's labour power—as a commodity. Its value is determined on the same basis as that of every other kind of commodity, by the amount of society's labour time which goes into producing it.What goes into producing labour power? Answer—the goods and services which the worker needs to consume in order to live and work.The value of the worker's labour power, then, is the value of life’s necessities such as housing, food, clothing, heating and means of relaxation which the worker needs to buy and consume.This will also include the value of those commodities consumed by the worker's dependents, some of whom may provide domestic labour which helps create the worker's capacity to work, and some of whom will provide the next generation of labour power. So the value of the worker's labour power is roughly equivalent to the value of commodities consumed by the worker and his or her dependents, for which the employer pays in full in the form of a wage.

But here is the secret revealed by Marx. All other commodities which the employer buys as inputs into the production process—the components, raw materials, power, the tools and machinery used up—are also bought at or around their value.This value is then transferred into the final product during production. It does not increase, and in general provides no profit for the capitalist who has paid other capitalists for it in full.The cost of this transferred or past value is merely passed onto the final consumer as part of the final price. In working on the inputs to transfer their value into the end product, the current workforce adds new value measured in labour time. In return for this new value, the employer pays a wage which again comprises part of the price of the final product.

Yet when the product is sold at its value, the employer receives more than the combined costs of the inputs and the newly added labour time.Where has this profit come from? The only possible source is the living labour which adds new value when transforming the inputs into the final product.The only feasible explanation is that the worker consumes less labour time in the form of essential commodities than the time he or she is able to work. In other words, the employer receives more value from the worker than the value of the wage which is paid in return.This 'surplus value', for which the employer does not pay but which is charged to the consumer in the final price, is the source of normal capitalist profit.

This is the unique quality of human labour power: it creates more value than it needs to consume.That, first and foremost, is why the capitalist employs the worker.

The truth of this contention is borne out by British government statistics. For example, in 2004 (the latest year for which figures are available), the total value of commodity goods and services produced by private non-financial corporations in Britain was £1,335 billion.This comprised £686 billion in inputs ('intermediate consumption'—mainly power, raw materials and components), £66 billion in machinery wear and tear ('consumption of fixed capital') and £583 billion of new value produced by the current labour force ('net value added'). In return for producing this £583 billion, workers received £347 billion in wages and salaries, plus £60 billion put aside in national insurance and pension contributions for future consumption (i.e. deferred wages, in theory at least).This left a surplus value of £176 billion to be distributed between different sections of the capitalist class—dividends to shareholders, interest payments to the banks, rent to landlords—and to finance the expansion of operations.

These official categories of value approximate only very roughly to those of Marxist political economy. Furthermore, as Marx himself recognised and explained, 'value' in the Marxist sense (i.e. socially necessary labour time) is not the precise equivalent of 'market price'—the only measurement we can use with any practical application.

Also, the statistics include transport and retail services which, it can be argued, only conserve or realise surplus value rather than directly produce it.Yet all commodities have to be transported, stored and sold—and all these operations have to be administered.Within those industries which directly produce surplus value—mining and quarrying, energy, manufacturing and construction—inputs have to be organised and administered.

The figures indicate that in Britain's capitalist economy as a whole, workers spend roughly two-thirds of their labour time performing labour equal to the value of their wage.The other one-third is spent working for no pay, performing surplus labour (or producing surplus value) for the capitalists. In those industries which directly produce surplus value, the proportion of working time spent doing so is approximately 40 per cent.

Where does this leave public sector workers who provide services which are not sold in any commercial sense, and are therefore not commodities?

Public sector workers perform functions which are important or essential to the functioning of a modern, complex capitalist society. Like workers in commodity production, they may be working for 39 hours a week—but their pay only enables them to consume, roughly, 26 hours worth of value.Therefore they too are exploited. One-third of their time is spent performing surplus labour, free of charge to the capitalist state.

It is in the interests of the capitalist class to keep down costs (including taxes to fund public expenditure) and to squeeze more unpaid working time out of all categories of workers, whether or not they directly produce surplus value.

Conversely, it is in the interests of all workers to maintain and raise the value of their wages.This can rarely be done effectively on an individual basis, given the imbalance of power between employer and employee. Hence the need for collective organisation, collective action and solidarity.The wages struggle asserts the right of the working class to have control over the value and wealth which it produces, helping to weld workers together in class organisations, raising their class consciousness (although this consciousness may initially be a narrow, sectional one).


In the course of analysing capitalism and its new factory-based system of mass production, Marx developed the philosophical concept of 'alienation'. Indeed, this is the essence of Marx's moral critique of capitalism. Whereas it is a human being's instinct to do things, to engage in physical and mental exertion, to be creative, indeed to 'create order out of chaos', exploitative modes of production turn this into compulsory labour.

Capitalism takes this a stage further, completely separating the worker from the product of her or his labour, in many cases dissolving that labour into commodities which render it unrecognisable. Machinery and automation— themselves the embodiment of physical and mental labour—increasingly dominate the work process, further diminishing the scope, visibility and individual significance of the living work force. It is as though the commodities themselves are the products of capital and not of labour.Then the commodity is sold back to the workers—if they can afford it—as an 'alien' product, available to them as 'consumers' in corporate stores far removed from the production process.All that connects work, production, ownership and consumption is thus reduced to the cash nexus. Money comes to dominate human beings as an alien force, both resented and desired, yet failing to satisfy the social, creative—indeed human— essence of human beings.

Thus the worker is alienated from capitalist society in three aspects: from the products of his or her own labour; from fellow human beings in the production process; and from a society which tends to reduce almost everything to a commodity with a price-tag. In these conditions, lack of motivation at work, sickness and absenteeism, disinterest in wider society, different kinds of escapism, crime and anti-social behaviour will tend to flourish.


Although human labour power is the source of capitalist profit in general, it does not follow that all capitalists seek to employ as many workers as possible. Because the price of a commodity is determined largely by the average social labour time (past and present) taken to produce it, across the whole sector, companies producing at below average cost will make extra profits at the expense of high-cost rivals. In effect, they are grabbing some of the surplus value created by the workforces of less efficient competitors.

Thus companies are always seeking to produce more cheaply than their competitors, whether through holding down wages, introducing new machinery or speeding up the pace of work.Where they can produce as much or more than before but with fewer and more productive workers, this will enable them to take a bigger share of the surplus value created across the whole sector. In the economy as a whole, mechanisation proceeds apace as employers fight for a bigger share of market value. Both the quantity and the proportion of capital invested in machinery grows, as the proportion going to wages declines.This constant drive to invest, mechanise and expand involves a constant process of capital accumulation.

Yet it is the current, living workforce which creates fresh value, from which the capitalists draw surplus value. Employers therefore have to counteract this historical tendency for the rate of profit to fall in most sectors and across the economy as a whole, which they try to do by reducing the real value of wages, intensifying the work rate, reorganising the work process etc.

Locating new markets and sources of cheap labour and raw materials abroad assist capital in this endeavour, while also providing profitable outlets for accumulated stocks of capital—hence the drive to colonise and dominate other parts of the world.

Bringing fresh contingents into the army of labour—ones which can often be exploited more intensively like young, women and immigrant workers—will also counteract falling profit rates, at least until those workers become organised and resist their super-exploitation.The divisions which can be created as cheaper workers undercut other sections of the working class play directly into the hands of the exploiters.

As employers strive to maximise market share, production and profits (including for investment and expansion), they also drive down the value of wages and so restrict the purchasing power of the largest class of consumers—the working class.

Hence the point is reached periodically when not all the commodities being produced can be sold at a profit. Orders for new machinery to increase output are cut back; workers in those sectors are laid off and their spending power diminishes. More commodities are unsold and, in turn, the workers who produce them are sacked. Soon the whole economy goes into a downward spiral.As workers resist—at least initially—the capitalist class and its mass media whip up potential divisions within the working class, identifying scapegoats and using the forces of the state against the labour movement.

In previous types of society, 'over-production' of goods for people's consumption would have been a cause for hearty celebration. Only under capitalism are cyclical crises of ‘over-production’ the occasion for alarm and depression as companies go to the wall, labour and machinery are thrown onto the scrap-heap and public services are slashed.

The crisis of over-production is also a crisis of the over-accumulation of capital. Economic expansion and boom generate surplus value which cannot be re­invested in the productive economy at a high enough profit, and so it finds its way into stocks, shares, bonds and other financial instruments, vastly inflating their 'value' as expressed in market prices. Marx referred to this as 'fictitious' capital.

Economic recession and slump therefore involve the destruction of capital, whether tied up in the 'real' economy or taking the form of fictitious capital.The value of capital is driven down towards its true worth, as an expression of—and an entitlement to—real goods and services produced by labour.

During the slump, bigger and stronger firms weather the storm until it becomes profitable to produce once more, utilising cheaper labour, cheaper credit and cheaper means of production.

In a modern, complex and integrated capitalist economy, crises can also arise because of imbalances in supply and demand between key sectors, because of related price shocks to key inputs (e.g. oil or steel) or as the result of financial dealings such as the mugging of a currency or the collapse of a major bank or investment fund (which itself may reflect an underlying crisis of capital values). Deeper structural crises can develop when a whole industry, sector, region or nation goes into decline as the result of obsolescence, mismanagement, corruption, unfair competition or some other factor.

In all these events, capitalism squanders and periodically destroys society’s productive forces.

This illustrates the most fundamental contradiction of the capitalist mode of production: the one between the forces of production—which are organised socially (i.e. within and across society as a whole)—and the relations of production, which are organised on the basis of private ownership and control.

The forces of production (i.e. the means of production, labour and technology) are drawn and combined together in a vast, complex process across the whole of society. But the relations of production, whereby one class owns the means of production and employs another class to work them, are based on the private and corporate property of a small minority.

For the big shareholders and directors, the purpose of production is to maximise profit and the wealth they derive from it. Production is not primarily carried out in order to meet people's needs, still less the needs of society as a whole.

Thus, for instance, houses are not built by private developers so that people can have homes.They are built only when a big enough profit can be made from selling houses.There could be a million people in need of a home—but unless they can pay a price which guarantees a profit (usually by taking out a mortgage to pay at least five times the building cost of the house), those houses will not be supplied. Where capital can gain a higher rate of return elsewhere, for example in armaments production or banking or through the employment of child labour overseas, its owners will seek to invest it there instead.

Similarly, technology is developed and deployed primarily in the interests of capitalist profit.Where there is little or no profit to be made, for example in the development of medicines for afflictions linked to poverty, the technology will not be pursued or applied unless public money is forthcoming. In hugely profitable sectors, on other hand, such as hi-tech entertainment systems, technological innovation is pursued and proclaimed relentlessly in order to ensure speedy obsolescence.As a matter of top priority in promoting the interests of capital at home and abroad, the capitalist state will devote substantial funds to military research and development.

This contradiction between private economic property and the drive for profit on the one hand, and social production and priorities on the other, has many other anti-social and inhumane consequences. On a global scale, it is reflected in the fact that 1 billion of the Earth's 6 billion people are severely undernourished, more than 2 billion lack sanitation and safe water supplies and over 1 billion are illiterate or unemployed.Yet modern society’s productive forces, if planned and owned and developed by society as a whole, could already more than satisfy the basic food, shelter, education and health needs of the world’s entire population.

Capitalism's fundamental contradiction also gives rise to others which have the most profound implications for our planet.These contradictions have deepened and multiplied as capitalism has succumbed to the power of monopoly.


The first stage of capitalism's existence was characterised by the advance of open markets, free competition and democratic ideas and freedoms, by the formation of national or multinational states, by industrialisation and urbanisation.

The second stage from the latter half of the 1800s saw the rise of big corporations and trusts which came to monopolise entire sectors of national economies. State power was used to help these monopolies win access to markets and raw materials in other countries, with the export of capital from the main imperialist centres becoming a significant feature. By the beginning of the 20th century, almost the whole world had been carved up into colonies or spheres of influence between the capitalist monopolies and their respective states. That’s why Lenin called this second stage ‘imperialism—the highest and final stage of capitalism’. It is also a stage when capitalism becomes markedly more parasitic and moribund, making huge profits from socially useless or dangerous activities such as military production, financial and property dealing, advertising and debt enslavement.

As early as the Manifesto of the Communist Party (1848), Marx and Engels had described the executive of the modern state (i.e. the highest levels of government, the civil service, police, armed forces and other state agencies) as a 'committee for managing the common affairs of the whole bourgeoisie'. Imperialist wars—and in particular the two world wars of the 20th century—have multiplied and strengthened the bonds between big business and the state apparatus. Politically, the capitalist monopolies have come to exert enormous political influence in the advanced capitalist countries.

This has produced a qualitative change, whereby monopoly capitalism’s economic power has effectively fused with the political power of the state. Lenin called this new development ‘state-monopoly capitalism’.

Today, the state plays a significant role in regulating the economy to stimulate monopoly profit (for example through public-funded civil and military contracts, state subsidies and services for business, economic development programmes, state ownership of unprofitable but essential industries, funding for research and development, fiscal and trade policies etc.). Many domestic and foreign policies are designed—often with its direct participation—to serve the interests of monopoly capital, although the state also has to mediate between different sections of people including those within the capitalist class itself.The whole system is lubricated by the circulation of money, personnel and posts between big business and the state apparatus.

Economically, monopoly has greatly accelerated the accumulation of capital, thereby reinforcing the tendency of the rate of profit to fall while also developing the means to drive it ruthlessly back upwards.The information technology stage of the scientific and technological revolution, combined with the internationalisation of financial and money markets, has produced a kind of 'turbo­capitalism'.

The drive of the monopolies to dominate resources, markets and transportation routes on an international scale draws their respective states into conflict with one another.While the imperialist powers may share an interest in suppressing their own working class at home and jointly exploiting weaker nations around the world, inter-imperialist rivalry always lies beneath the surface of any expedient unity. It usually expresses itself in trading and diplomatic disputes. But when competition is sharpest the consequence can be war—often fought by proxy through other governments and movements, but occasionally breaking out between the monopoly capitalist powers themselves.

Because the major capitalist states have perpetually to be ready to suppress revolt at home and enforce their interests abroad, militarism and the drive to war are essential features of imperialism.

Imperialism itself has passed through a number of distinct phases.The first was characterised by world wars between the major capitalist powers—some of which had turned to fascism—to re-divide the world.This phase, which lasted until the end of World War Two in 1945, also featured socialist revolution in Russia in 1917 and a slump across much of the capitalist world in the late 1920s and early 1930s.

The second phase, from the 1940s until the 1990s, saw the stabilisation and restructuring of imperialism in a world where the construction of an international socialist camp led by the Soviet Union helped to secure welfare states in the West and the destruction of colonialism. In that second phase, too, we witnessed the rise of the industrial and financial transnational corporations, based in the developed capitalist countries and coming to play a major role in production and in international finance, investment and trade.

Now a new, third phase of imperialism is emerging which will intensify all these contradictions of capitalism, including its uneven economic and political development—thereby widening still further the gap between rich and poor on a global level. Its advocates—and some of its critics—call it ‘globalisation’.Although presented as some mysterious and inevitable development, it is in fact a strategy driven by the world’s most powerful capitalist monopolies and their states. Its primary economic goal is the unhindered penetration of every part of the world by monopoly capital, thus requiring the free movement of capital, the deregulation of labour and the privatisation of almost all public sector industries and services.

New international institutions such as the World Trade Organisation have been added to existing ones, such as the International Monetary Fund and World Bank, in order to drive through the necessary policies on a global scale. It should not be forgotten, however, that these institutions are dominated by the US, the three major imperialist powers of the European Union (Germany, Britain and France) and Japan—and not by mysterious market forces or some anonymous international capitalist class.

Of course, this ‘new world order’ currently being imposed is not without its economic—let alone its profound political—contradictions. Since the collapse of the Soviet Union, especially, competition and conflict between rival capitalist monopolies and their respective states have come out into the open .

Moreover, the power and freedom of transnational corporations is causing growing problems in the developed capitalist countries as well as in the Third World. In Britain, for instance, the export of capital is severely eroding the country’s manufacturing base, while privatisation of essential services is proving to be grossly inefficient and—for working people at least—hugely expensive.

In fact, what we have here is a deepening contradiction between the economic, social and democratic requirements of society in each country on the one side, and the processes of monopoly capitalist globalisation—driven by the major capitalist states—on the other. It is an antagonistic contradiction which can only be resolved in the realm of politics, through socialist revolution.

Discussion Questions

1.How do employers seek to (a) intensify and (b) disguise exploitation at work, and how can their efforts be challenged?

2.Why and especially how does capitalism divide different categories of the working class—and how can this be countered?

3.Suggest ways in which capitalism holds back the full development of modern society’s productive forces.

4.Why does monopoly lead to imperialism?

5.Why is trade union militancy on wages, pensions and working conditions (a) vital and (b) not enough?