Turn Left Chronicles
Who Creates Wealth in a Modern Economy?
Learn about Marx’s Labor Theory of Value.
Today, we discuss one of the central concepts underpinning the critique of capitalism presented in “Das Kapital.” Karl Marx with his friend Friedrich Engels — two great 19th-century thinkers — shook capitalism to its core with the Labor Theory of Value. LTV elaborates on how a commodity gets its worth or value.
What is a commodity? A commodity is something useful or valuable that can be bought or sold. In a capitalist economy, commodities include things you buy like coffee or gasoline. Necessities like housing and healthcare are also made into commodities.
Socialist economies form in such a way as to ensure all people have a decent standard of living that improves over time. Whether statist or voluntary, they have an inherent purpose beyond a profit motive — such as promoting the general welfare. Capitalists lack a purpose beyond capital accumulation at whatever social or environmental cost.
This article seeks to develop consciousness among the working class on the nature of their exploitation. It discusses where commodities get their value, how capitalists exploit labor and nature to their benefit, and how this concept remains relevant today. In doing so, we advance the ongoing struggle toward collective liberation from the dictates of capital.
Where Commodities Get Their Value
Marx breaks down commodities into two dimensions: use-value (its utility) and exchange value (its market worth). Use-value satisfies needs; exchange value is the labor time socially necessary for production. This isn’t about individual producers’ efforts but the average time required in society under prevailing conditions.
He stated that a commodity’s value derives from the average labor time required to create it. It’s a sharp departure from the subjective theories of Adam Smith and David Ricardo, who argued value stems from subjective preferences. In other words, they asserted that value comes from what people are willing to pay for it.
The ruling class exploits workers and nature by manipulating this discrepancy. You see, capitalists pay workers much less than the total value of what workers produce. Most often, they pay subsistence-level wages.
You earn just enough to stay alive and return to work, but not enough to save for the future. Capitalism systematically steals our wages. The ruling class denies us the ability to make decisions in the workplace. They hoard the fruits of our unpaid labor.
Let’s say you work in a factory. The worker produces several cars per day. The factory owner does not pay you the full value of what you make. Rather, they compensate you for the hours of labor you sell. Your income is never the total value of the products you sell or make but a small portion. Leftist critics once called this “wage slavery.”
Surplus Value and Exploitation
Surplus value is a pivotal concept — the extra value workers create beyond their wages. This surplus is pocketed by capitalists as profit, fueling Marx’s argument about exploitation. By extracting surplus value, capitalists perpetuate a cycle where profit-seeking clashes with workers’ rights and fair wages. This profit-seeking clashes also with the ability of nature to sustain itself.
People complain about the amount we pay in taxes. Often, we disregard how the wealthy now pay a smaller share of their income on taxes than the working class. The mega-rich have little tax burden nowadays, a phenomenon which is eerily similar to feudalism. Nobles paid less tax than peasants due to their willingness to perpetuate this system.
Because union rates fell since the last midcentury, workers lost their collective bargaining power with the well-organized owning class. Over the past decades, wages largely stagnated compared to the rise in workers’ productivity given technological breakthroughs.
We should no longer allow them to take our labor. When we stand together, we decide whether to keep the full fruits or take collective action. Either way, one may not honestly call the current system a democracy when we lack economic agency.
Exploitation of the Natural World
The capitalist also steals the work performed by nature in its exploitation for profit. Consider the labor of bees to produce honey. Also, capitalists refer to externalities as external costs in profit-seeking that the business does not pay.
Imagine failing to mitigate the effects of water or exhaust outflow on natural habitats for example. The environmental costs connected to generating the capitalists’ wealth go unpaid. They hoard profits rather than invest to mitigate the environmental effects of their economic production.
For Marx, under capitalism, a commodity’s value isn’t just its market price but the social labor needed to produce it. The cost of something comes from how many labor hours went into it. This means labor is the true source of economic value, challenging the dominance of capital and land in classical economics.
Critique and Modern Relevance
Critics argue Marx oversimplifies market complexities, sidelining consumer demand and technological progress in value determination. Yet, his theory resonates in debates on income inequality and labor rights today. It offers a view into wealth distribution, why poverty persists, and labor exploitation worldwide.
Another way to view this is that the philosophy of accumulating capital relies on the impoverishment of workers and nature. The ruling class says because they own the means of production, they are entitled to keep all profits made. This concept perpetuates harm, wrongly justifies resource hoarding, and diminishes the health of the natural world.
The ruling class cannot provide solutions to these problems. The economic hardship experienced by the working class is a direct result of capitalists seeking ever-greater profits at any expense. We find solutions when we look beyond the current paradigm.
In sum, Marx’s theory of value remains a powerful tool for critiquing capitalism. Its focus on labor’s role in value creation, exploitation dynamics, and class struggle continues to fuel discussions on economic justice and social transformation. Only once workers develop their class consciousness and engage in collective struggle will something be done about it.
Final Thoughts
The Labor Theory of Value spotlights that the value of a commodity derives from the average human labor necessary to produce it. It emphasizes how the capitalist withholds the value of the workers’ labor. The social hierarchy enforced by capital requires exploiting fellow humans and nature to create and maintain itself.
Furthermore, it reminds us how we get a better share when workers organize. If you wish to have a say at work, collectively withholding your labor is a great way to get concessions. Greater change comes beyond that when we seize the means of production and build an alternative.
Value does not come from capitalists owning and withholding resources from the common good. The value produced comes from the labor of you, me, and the natural world. Once we develop class consciousness and organize our labor, the ruling class will fall to its knees.
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