Surplus product
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Surplus product (German: Mehrprodukt) is a concept explicitly theorised by Karl Marx in his critique of political economy. Notions of "surplus produce" have been used in economic thought and commerce for a long time, but in Das Kapital and the Grundrisse Marx gave the concept a central place in his interpretation of economic history.
In Das Kapital and other writings, Marx divides the "social product" (total output) of society's labour force into the necessary product and the surplus product. The necessary product refers to the output of products and services necessary to maintain a population of producers and their dependents at the prevailing standard of life. The surplus product is whatever is produced in excess of those necessaries. Strictly speaking, however, this distinction is a simplification, since a society must usually also hold a fraction of the social product in reserve at any time.
In producing, people must maintain their assets, replace assets, and consume things (productive consumption and final consumption) but they also can create more beyond those requirements, assuming sufficient productivity of labour.
This social surplus product can be:
- destroyed, or wasted
- held in reserve, or hoarded
- consumed
- traded
- reinvested (accumulated)
If the surplus product is simply held in reserve, wasted or consumed, no economic growth (or enlarged economic reproduction) occurs. Only when the surplus is traded and/or reinvested, does it become possible to increase the scale of production.
For example, surplus seeds could be left to rot, stored, eaten, traded for other products, or sown on new fields. But if for example 90 people own 5 sacks of grain, and 10 people own 100 sacks of grain, it is physically impossible for those 10 people to use all that grain themselves - most likely they would either trade that grain, or employ other people to farm it.
The existence of a surplus product normally assumes the ability to perform surplus labour, i.e. labour beyond that which is necessary to maintain society at the existing standard of life. In Capital Vol. 1, chapter 9 section 4, Marx defines the capitalist surplus product exclusively in terms of the relationship between the value of necessary and surplus labour; at any one time, this surplus product is lodged simultaneously in money, commodities and labour-services, and therefore not a "physical" surplus product (a stockpile of additional goods).
In Marx's view, as he expresses it in the Grundrisse all economising reduces to the economy of human labour-time. The greater human productivity is, the more time there is - potentially - to produce more than is necessary to simply reproduce the population. Alternatively, that extra time can be devoted to leisure, but who gets the leisure and who gets to do the extra work is usually strongly influenced by the prevailing power and moral relations, not just economics.
[edit] Marxian interpretation of the historical origin of the surplus product
For most of human prehistory, writers like Ernest Mandel and V. Gordon Childe argue, there existed no economic surplus product of any kind at all, except very small or incidental surpluses.
The main reasons were:
- that techniques were lacking to store, preserve, package surpluses securely in large quantities or transport them reliably over any significant distance,
- the productivity of labour was not sufficient to create much more than could be consumed by a small tribe,
- early tribal societies were mostly not oriented to producing more than they could actually use, never mind maximising their production of output.
The formation of the first permanent surpluses are associated with tribal groups who are more or less settled in one territory, and stored foodstuffs. Once some reserves exist, tribes can diversify their production, and members can specialise in producing tools, weapons, containers and ornaments.
Therefore, the formation of a surplus product makes possible an initial technical or economic division of labour. In addition, a secure surplus product makes possible population growth, i.e. less starvation, infanticide or abandonment of the elderly or infirm.
The first real "take off" in terms of surpluses, economic growth and population growth probably occurred during what V. Gordon Childe called the neolithic revolution, i.e. the invention and spread of agriculture, possibly from about 10,000 years ago onwards, at which time the world population is estimated to have been between 4 and 10 million.
This created a division of labour between farmers and craftspeople who trade with each other, and more sophisticated forms of labour co-operation as well as the keeping of slaves. It makes possible an initial accumulation of wealth, which in turn enables the formation of an elite or ruling class.
This group or class is permanently freed from the necessity to work for a living, and is therefore able to live off the labour of others. This could be regarded as exploitation but also as a source of progress, insofar as the rulers have time to think and advance human knowledge and technique.
The increasing economic division of labour is closely associated with the growth of trade and goes together with an increasing a social division of labour. One group in society utilises its position in society (e.g. the management of reserves, military leadership, religious authority, etc.) to gain control over the social surplus product; asserting its social power, the rest of the people is forced to leave the control over the surplus product to them.
From that point on, the surplus product is formed within a class relationship, in which the exploitation of surplus labour combines with resistance to that exploitation. To maintain social order and enforce a basic morality, a state apparatus emerges with soldiers and officials, separate from society and subsidized by the surplus product via taxes and tributes. Because the ruling elite controls the production and distribution of the surplus product, it thereby also controls the state. In turn, this gives rise to a moral or religious ideology which justifies superior and inferior positions in the division of labour, and explains why some people are entitled to appropriate more resources than others.
Archaeologist Bruce G. Trigger comments:
"It appears that, regardless of the agricultural regime followed, between 70 and 90 percent of the labour input in early civilizations was, of necessity, devoted to food production. This means that all early civilizations had to remain predominantly agricultural. It also means that the surplus resources available to the upper classes were never large in relation to total production and had to be used carefully. Because of this, strategies for increasing revenue had to be mainly political: increasing the number of farmers controlled, creating situations in which ruling groups shared available resources more disproportionately according to rank, or persuading farmers to surrender marginally greater amounts of surplus production without increasing the cost of the mechnanisms needed to ensure social control." - Understanding Early Civilizations, Cambridge University Press, 2003, p. 313-314
Archaeologist Brian M. Fagan comments:
"The combination of economic productivity, control over sources and distribution of food and wealth, the development and maintenance of the stratified social system and its ideology, and the ability to maintain control by force was the vital ingredient of early states" - World Prehistory, 4th edition, p. 189.
Fagan dates the first state-organized societies at about 3100 B.C. in Egypt and Mesopotamia.
[edit] Surplus product and socio-economic inequality between people
The size of the surplus product, based on a certain level of productivity, has implications for how it can possibly be shared out. Quite simply, if there is not enough to go around, it cannot be shared equally. If 10 products are produced, and there are 100 people, it is fairly obvious they cannot all consume or use them; most likely, some will get the products, and others must do without. This is according to Marx and Engels the ultimate reason for socio-economic inequality, and why, for thousands of years, all attempts at an egalitarian society failed. Thus they wrote:
"All conquests of freedom hitherto... have been based on restricted productive forces. The production which these productive forces could provide was insufficient for the whole of society and made development possible only if some persons satisfied their needs at the expense of others, and therefore some - the minority - obtained the monopoly of development, while others - the majority - owing to the constant struggle to satisfy their most essential needs, were for the time being (i.e. until the birth of new revolutionary productive forces) excluded from any development. Thus, society has hitherto always developed within the framework of a contradiction - in antiquity the contradiction between free men and slaves, in the Middle Ages that between nobility and serfs, in modern times that between the bourgeoisie and the proletariat." (The Germany Ideology, ed. C.J. Arthur, 1970, p. 116, emphasis added).
But it would be erroneous to simply infer the pattern of socio-economic inequality from the size of the surplus product. That would be like saying that "people are poor, because they are poor". At each stage of the development of human society, there have always been different possibilities for a more equitable distribution of wealth. Which of those possibilities have been realised, is not just a question of technique or productivity, but also of the assertion of power, ideology and morals within the prevailing system of social relations. The wealth of some may depend on the poverty of others.
Some scarcity is truly physical scarcity; other scarcity is purely socially constructed, i.e. people are excluded from wealth not by physical scarcity, but through the way the social system functions. In modern times, calculations have been done of the type that an annual levy of 5.2% on the fortunes of the world's 500 or so billionaires would be financially sufficient to guarantee essential needs for the whole world population (cited in Damien Millet & Eric Toussaint, Who Owes Who? 50 Questions about World Debt. London: Zed Books, 2004, p. 12). In money terms, the world's 1,100 richest people have almost twice the assets of the poorest 2.5bn or 40% of the world population (David Rothkopf, "Change is in the air for financial superclass", Financial Times, 15 May 2008).
In that case, there is no real physical scarcity with regard to the goods satisfying basic human needs anymore. It's more a question of political will and social organisation to improve the lot of the poor, or, alternatively, for the poor to organise themselves to improve their lot.
[edit] Surplus product in capitalist society
The category of surplus product is a transhistorical economic category, meaning it applies to any society with a stable division of labour, and a significant labour productivity, regardless of how exactly that surplus product is produced, what it consists of, and how it is distributed. That depends on the social relations and relations of production specific to a society, within the framework of which surplus labour is performed. Thus, the exact forms taken by the surplus product are specific to the type of society which creates it.
If we plotted economic growth or population growth rates on a graph from, let's say, the year zero, we would obtain a tangent curve, with the sharp bend occurring in the 19th century (see e.g. Eric. D. Beinhocker, The Origin of Wealth. New York: Random House, 2007, p. 10). Within the space of 100 years, a gigantic increase in productivity occurred with new forms of technology and labor-cooperation. This was, according to Marx, the "revolutionary" aspect of the capitalist mode of production, and it meant a very large increase in the surplus product created by human labour. Marx believed it could be the material basis for a transition to communism in the future.
Economic historian Paul Bairoch comments:
"...in traditional societies the average agricultural worker produced an amount of foodstuff only about 20 to 30% in excess of his family's consumption. (...)These percentages - this 20 to 30% surplus - acquire special meaning if we take into account a factor often omitted from theories of economic development, namely, the yearly fluctuations of agricultural yields, which even at a national level could amount to an average of over 25%. Consequently, periodical subsistence crises became inevitable, crises greater or less in degree but which at their worst could produce a decline in economic life and hence in the civilisation it supported. For this reason, as long as agricultural productivity had not progressed beyond that stage, it was practically impossible to conceive of a continuous progress in the development of civilisations, let alone of the accelerated scientific and technical progress that is an essential characteristic of modern times. The profound changes in the system of agricultultural production that preceded the industrial revolution brought that particular deadlock to an end. The consequent increase in productivity led in the space of 40 to 60 years to the transition from an average surplus of the order of 25% to something more like 50% and over, thus surpassing - for the first time in the history of mankind - what might be called the risk-of-famine limit; in other words, a really bad harvest no longer meant, as in the past, serious shortage or actual famine. The agricultural revolution... prepared the way for the industrial revolution." - Paul Bairoch, "Agriculture and the industrial revolution 1700-1914", in: Carlo Cipolla (ed.), The Industrial Revolution - Fontana Economic History of Europe, Vol. 3. London: Collins/Fontana, 1973, p. 453-454
Specific to the surplus product within capitalist society, as Marx discusses in Das Kapital, are these main aspects (among others):
(1) The surplus product itself no longer consists simply of "physical" surpluses or tangible use-values, but increasingly of tradeable commodities or assets convertible into money. Claims to the social product are realised primarily through purchase with money, and the social product itself can be valued in money prices.
(2) The economising and division of the necessary and surplus product between different uses, and between different social classes, is increasingly also expressed in quantities of money units. The emphasis is on maximising wealth as such, based on calculations in terms of abstract price relations.
(3) There is an increasingly strong connection between the surplus product and surplus value, so that, as the capitalist mode of production expands and displaces other ways of producing, surplus-value and the surplus-product become to a large extent identical. In a purely capitalist society they would be completely identical (but such a society is unlikely ever to exist, other than in economic models and analogies).
(4) The ability to claim the surplus value created in production through the production of new output, in the form of profit income, becomes very dependent on market sales and buying power. If goods and services fail to sell, because people have no money, the business owner is left with surpluses which are useless to him, and which very likely deteriorate in value. This creates a constant need to maintain and expand market demand, a growing world market for products and services.
(5) Competition between many different private enterprises exerts a strong compulsion to accumulate (invest) a large part of the surplus product to maintain and improve market position, rather than consume it. Failure to do so would drive business owners out of business. For Marx, this was the main cause behind the gigantic increase in economic growth during the 19th century.
(6) The corollary of the enormous increase in physical productivity (output of goods) is that a larger and larger component of the social product, valued in money prices, consists of the production and consumption of services. This leads to a redefinition of wealth: not just a stock of assets, but also the ability to consume services enhancing the quality of life (note: many activities called "services" supply tangible products).
(7) The dialectic of scarcity and surplus gradually begins to invert itself: the problem of optimal allocation of scarce resources begins to give away to the problem of the optimal allocation of abundant resources. High productivity leads to excess capacity: more resources can be produced than can be consumed, mainly because buying power is lacking among the masses. This can lead to dumping practices.
Marx believed that, by splitting purely economic-commercial considerations off from legal-moral, political or religious considerations, capitalist society for the first time in history made it possible to express the economic functions applying to all types of society in their purest forms (this is discussed in Kozo Uno, Theory of a Purely Capitalist Society. Harvester Press).
In pre-capitalist society, "the economy" did not exist as a separate abstraction or reality, anymore than long-term mass unemployment existed (other than in exceptional cases, such as wars or natural disasters). It is only when the "cash nexus" mediates most resource allocation, that "the economy" becomes viewed as a separate domain, quantifiable by means of money-prices.
A socialist society, Marxian economists argue, also has a surplus product from an economic point of view, but its creation and distribution would begin to operate with different rules. In particular, how the new wealth is allocated would be decided much more according to popular-democratic and egalitarian principles, using a variety of property forms and allocative methods that have proved practically to correspond best to meeting the human needs of all. 20th century experience with economic management shows that there is a broad scala of possibilities here; if some options are chosen, and others not, this has more to do with who holds political power than anything else.
[edit] Measurement of the surplus product
The magnitude of the surplus product can be estimated in stocks of physical use-values, in money prices, or in labour hours.
If it is known:
- what and how much was produced in a year,
- what the population structure is,
- what incomes or earnings were received,
- how many hours were worked in different occupations,
- what the normal actual consumption pattern is,
then measures of the necessary product and surplus product can in principle be estimated (see further on this Anwar Shaikh & Ergutul Tonak, Measuring the Wealth of Nations: The Political Economy of National Accounts, Cambridge University Press 1994).
However it is never possible to obtain mathematically exact or fully objective distinctions between necessary and surplus product, because social needs and investment requirements are always subject to moral debate and political contests between social classes. At best, some statistical indicators can be developed. In Das Kapital, Marx himself was less concerned with measurement issues than with the social relations involved in the production and distribution of the surplus product.
Essentially the techniques for estimating the size of the surplus product in a capitalist economy are similar to those for measuring surplus-value. However, some components of the surplus product may not be marketed products or services. The existence of markets always presupposes a lot of non-market labour as well. A physical surplus product is not the same as surplus value, and the magnitudes of surplus product, surplus labour and surplus value may diverge.
[edit] Surplus product and the social valuation of labor
Although it is nowadays possible to measure the number of hours worked in a country with reasonable accuracy, there have been few attempts by social statisticians to estimate the surplus product in terms of labour hours.
Very interesting information has become available from time use surveys however on how people in society on average spend their time. From this data, it is evident just how much modern market economies in reality depend on the performance of unpaid labour. That is, the forms of labour that are the subject of commercial exploitation are quantitatively only a sub-set of the total labour which is done in a society, and depend on non-market labour being performed.
This in turn creates a specific and characteristic way in which different labour activities are valued and prioritised. Some forms of labour can command a high price, others have no price at all, or are priceless. Nevertheless all labor in capitalist society is influenced by value relations, irrespective of whether a price happens to be imputed to it or not. The commercial valuation of labor may not necessarily say anything though about the social or human valuation of labor.
[edit] Surplus product and decadence
Marxian theory suggests decadence involves a clear waste of a large part of the surplus product from any balanced or nuanced human point of view, and it typically goes together with growing indifference to the wellbeing and fate of other human beings; to survive, people are forced to shut out from their consciousness those horrors which are seemingly beyond their ability to do anything about, anymore. Marx & Engels suggest in The German Ideology that in this case the productive forces are transformed into destructive forces.
According to Marxian theory, decaying or decadent societies are defined mainly by the fact that:
- the gap between what is produced, and what could potentially (or technically) be produced grows sharply, or, production declines absolutely.
- a very large proportion of the surplus product is squandered, or devoted to luxury consumption, speculative activity or military expenditures.
- all sorts of activities and products appear which are really useless or even harmful from the point of view of improving human life; to the detriment of activities which are more healthy for human life as a whole.
- enormous wealth and gruesome poverty and squalor exist side by side, suggesting that society has lost its sense of moral and economic priorities. The ruling elite no longer cares for the welfare of the population it rules, and may be divided within itself.
- a consensual morality and sense of trust has broken down, criminality increases, and the ruling elite has lost its legitimacy in the eyes of the people, so that it can maintain power only by the crudest of methods (violence, propaganda and intimidation whereby people are cowed into submission).
- a regression occurs to the ideas, values and practices of an earlier period of human history, which may involve the treatment of other people as less than human.
- the society "fouls its own nest" in the sense of undermining the very conditions of its own reproduction. (see further e.g. Gyorgy Lukacs, The Destruction of Reason and Ernest Mandel, Late Capitalism).
Marxian scholars such as Ernest Mandel argue this condition typically involves a stalemate in the balance of power between social classes, none of which is really able to assert its dominance, and thus able to implement a constructive programme of action that would ensure real social progress, and benefit the whole population.
However, there is a lot of controversy among historians and politicians about the existence and nature of decadence, because value judgements and biases about the meaning of human progress are usually involved.
In different periods of history, people have defined decadence in very different ways. For example, hedonism is not necessarily decadent, it is decadent only within a certain context. Thus, accusations of decadence may be made which only reflect a certain moral feeling of social classes, not a true objective reality.
[edit] Criticism
At the simplest level, it is argued that in trade, one man's gain in another man's loss, so if we subtracted total losses from total gains, the result would be zero. So how then can there be any surplus, other than goods which fail to be traded? Many arguments have been given to show that there are only incidental surpluses of some kind.
Yet, peculiarly, even on a crude estimate of value added, the Gross Output value of production equals more than labour and materials costs. If a surplus does not exist, it becomes difficult to explain how economic growth (the growth of output) can occur, and why there was more to distribute than there previously was.
The denial that a surplus product exists therefore tends to focus more on the definition of it, i.e. "surplus" in relation to what exactly? Some ecologists also argue that we should produce no more than we really need, in an ecologically responsible way.
Another type of criticism is that the very notion of surplus product is purely relative and circumstantial, or even subjective. A person can regard something as a 'surplus' if he has command or effective control over it, and is in a position where he can use it in whatever manner he thinks appropriate, even although others would not regard it as "surplus" at all.
This raises the question of how we can objectively know whether something is really surplus or not - at best we can say that something is surplus relative to a given set of verifiable human needs, conditions or requirements. But that is just to say that the existence of a surplus product involves power relations among people, who assert what is surplus and what is not, in a perpetual contest over the division and distribution of the social product of their labor.
Randall H. McGuire, a Marxist archaeologist, emphasizes that:
In V. Gordon Childe's scheme the social surplus exists first, and then the ruling class arises to exploit this surplus. This view assumes that there exists a set quantity of stuff that is needed for social reproduction, and that once primary producers make more than this amount, they have produced a social surplus. There does not, however, exist a set amount of stuff that is necessary for social or biological reproduction. The amount and quality of calories, protein, clothing, shelter, education, and other things needed to reproduce the primary producers can vary enormously from time to time and place to place. The division between necessary and surplus labour reflects an underlying relationship, class, when one group, an elite class, has the power to take labor or the products of labor from another, the primary producers. This relationship defines social surplus" - Randall H. McGuire, A Marxist Archaeology. New York: Percheron Press, 2002, p. 186-187
Anthropologist Robert L. Carneiro also comments:
The principal difficulty with [Gordon Childe's] theory is that agriculture does not automatically create a food surplus. We know this because many agricultural peoples of the world produce no such surplus. Virtually all Amazonian Indians, for example, were agricultural, but in aboriginal times they did not produce a food surplus. That it was technically feasible for them to produce such a surplus is shown by the fact that, under the stimulus of European settlers' desire for food, a number of tribes did raise manioc in amounts well above their own needs, for the purpose of trading. Thus the technical means for generating a food surplus were there; it was the social mechanisms needed to actualize it that were lacking - Robert L. Carneiro, "A theory of the origin of the state", in Science, New Series, Vol. 169, No. 3947, (Aug. 21, 1970), p. 733).
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In recent years, right-wing elite scholars have realised that, because official economics is strictly separated from politics, they have absolutely nothing to match the explanatory power of Marx & Engels's integrated theory. This is now leading to searches for alternative approaches to economic history, which would integrate politics and economics again in order to prove Marx wrong (an example is D. C. North, J.J. Wallis & B.R. Weingast, "A Conceptual Framework for Interpreting Recorded Human History" NBER Working Paper No. W12795) [1]. Marx would probably have welcomed that (in Das Kapital he said that he welcomed every genuine scientific criticism) because the criticism would bring to light new facts and insights, enriching our understanding of human history. He was well aware of how people projected their current class prejudices into their historical interpretations, but at least they might yield new research findings.
[edit] References
- Robert J. Wenke, Patterns in Prehistory.
- Jairus Banaji, "Historical arguments for a 'logic of development' in 'precapitalist' agriculture". In: Journal of Historical Sociology, Vol. 5 No. 4 December 1992, pp. 379-391.
- Henri J. M. Claessen & Peter Skalník, The Early State.
- Henri J.M. Claessen and Pieter Van De Velde (eds), Early State Economics.
- Henri J.M. Claessen, Pieter Van De Velde (eds), Early State Dynamics.
- Lawrence Krader, Formation of the state.
- Ron Stanfield, The economic surplus and neo-Marxism.
- Mahesh C. Regmi, The state and economic surplus : production, trade, and resource-mobilization in early 19th century Nepal.
- Chris Harman, A People's History of the World.
- Maurice Godelier, Perspectives in Marxist Anthropology.
- Ernest Mandel, Marxist economic Theory, Vol. 1.
- Karl Marx, Das Kapital
- Georges Bataille, The Accursed Share.
- Charles Woolfson, The Labour theory of Culture: A Re-examination of Engels's Theory of Human Origins.
- Lawrence Krader, Labor and value.
- Roman Rosdolsky, "The Distribution of the Agrarian Product in Feudalism", in: Journal of Economic History (1951), pp. 247–265
- Howard, M.C. & King, J.E. (2001). "Ronald Meek and the rehabilitation of surplus economics", in S.G. Medema & W.J. Samuels (eds), Historians of Economics and Economic Thought, London: Routledge, 185-213.
