How may the Capitalist System lead to exploitation of workers?

SC3101 Social Thought and Social Theory is by far the most insightful and enjoyable module I am taking this semester.

During a make up tutorial with Dr. George Radic’s class today, he explained Karl Marx’s reading, “Capital” so well, and I finally understood a glimpse of why Marx thinks that the Capitalist system may lead to exploitation. Let me attempt to explain his fascinating idea:

First, commodity is defined as any product that satisfies the needs of humans, and is in turn traded for something else. Each commodity has two types of values: use-value and exchange-value. Use-value expresses how much a commodity is of value to the needs or preferences of somebody. A pen may be of immense use-value to someone who prefers writing on paper, but of no value to someone who types in the computer instead. As use-value is subjective to individuals, it is not important in the discussion here. On the other hand, exchange value is the value of a product as determined by market supply and demand. If the demand of gold increases or the supply of gold decreases so much that there is a higher demand, the value of gold increases. If the demand of gold decreases or the supply of gold increases so much that there is no more demand, then the value of gold decreases.

(** Just a side note, this is also a common criticism of the Capitalist system. You may wonder, when supply is too much for the demand available, shouldn’t producers simply cut down the supply to prevent overproduction? In reality, that is not true. Instead, products, especially perishable goods such as milk, will be thrown away to lower the supply supplied to consumers, creating major wastage of products. Another way producers can earn profit is to artificially restrict the production or supply of goods, even if they have the means to do produce more to meet the demands of consumers, so as to raise the price of the products they sell. )

So where does the exploitation of workers come in this picture?

In the Capitalist system, the working class are people with no property, and are hence made to sell their labour power as means of survival. Labour-power is commoditised and the labour time that is necessary to create a product is exchanged for the creation of a product. Here comes the problem.

Are the value of products determined by how much labour time was invested into the products? The simple answer is no. Because the value of products are determined by how the market values them, a worker can spend 1000h in a pair of shoes, and the pair of shoes is sold for a meagre sum of $0.50. The sums just do not add up. Workers are exploited as the value of the products they create does not take into the account of their labour time and effort.

So this is Marx theory of labour in essence. Of course this may be a huge simplification of Marx’s theories and there are also plenty of assumptions made on the part of Marx as well (e.g. value of a product may determined by more factors than just demand and supply), but it does also help to explain why humans are so obsessed with money as well.

Money is the measure of the value of commodity as determined by market forces. (*Note that money can also be a commodity in the context of foreign exchange market) But while money can be equivalent to the commodity, commodities are not important to the Capitalists. Only money is important because only money can be exchanged for something else. That is when money becomes the sole definition of everything and people start to fetishise over money. An example is Education. We do not go to school to get a job and buy a car. We go to school to get a job and earn money. With this money we can exchange it for many commodities such as a car. Marx terms this phenomenon “the fetishism of money”.

And that’s all I learnt that I wanted to share today. 🙂