29 September 2026 · Ethics and the State

Marx on Commodities, Labor, and Surplus Value

Karl Marx wrote Capital, his major work of political economy, across the 1860s and 1870s, and followed it with shorter, sharper pieces aimed at particular arguments of his day, including the Critique of the Gotha Programme and parts of his notebooks later published as Theories of Surplus Value. Taken together, these three readings push against nearly everything covered earlier in this course. Against Locke, who had grounded private property in the simple act of mixing one's own labor with unowned nature, Marx effectively asks what happens once most people own no land or tools to mix their labor with in the first place, so that the only thing left for them to sell is their own capacity to work, on terms set by whoever already owns the means of production. Against Bentham and Mill, who judge arrangements by whether they produce the greatest satisfaction on balance, Marx answers that an exchange can satisfy the formal conditions of a fair bargain between consenting parties and still rest on one side needing to sell its labor simply to survive, which is a very different thing from a free and equal transaction between two parties with real alternatives.

What a commodity actually is

Marx opens Capital by taking apart something that looks completely ordinary, a single commodity such as a coat or a length of linen. Every commodity has two sides. It has a use value, meaning it satisfies some human want, and it has an exchange value, meaning it can be traded for a certain quantity of other commodities. Marx argues that what makes commodities exchangeable with each other in fixed proportions is the labor that went into making them, measured not by how long any one worker actually took but by the labor time that is socially necessary under the ordinary conditions of production at the time. A weaver using an old hand loom does not add more value than a weaver using a power loom just because the work took longer, since the market only recognizes the average time a piece of cloth now takes to produce.

He separates two senses of labor that get blended together in the word itself. Concrete labor, the specific craft of tailoring or weaving, is what produces a particular useful thing. Abstract labor, labor considered simply as an expenditure of human effort in general, is what allows totally different products such as a coat and a length of linen to be compared and exchanged at all. Marx also works through how value expresses itself, building toward the point where money becomes the one commodity that expresses the value of all others.

How money turns into capital

Marx then distinguishes two different circuits. In simple selling, a person sells a commodity for money and uses that money to buy a different commodity, so the point of the exchange is to end up with something to use. Capital works the other way around: money is advanced to buy a commodity which is then sold again for more money than was laid out at the start. Since nobody would advance money for no return, Marx treats this leftover amount, which he calls surplus value, as the entire purpose of the exercise, and he states plainly that this pattern, buying in order to sell at a profit, is the general formula that defines capital as such.

The puzzle he sets himself is where this extra value can possibly come from if, as he has already argued, commodities exchange at their true values rather than through cheating or clever bargaining. His answer is that the capitalist finds one special commodity on the market whose use creates more value than it costs, and that commodity is labor power, meaning a worker's capacity to work for a given stretch of time. Two conditions have to hold before labor power can appear on the market as something to be bought and sold at all: the worker has to be personally free to dispose of his own capacity to work, and he has to have nothing else to sell, no land, no tools, no stock of goods, so that selling his labor power is his only way of getting access to the means of subsistence.

The price of this commodity, like the price of any other, is set by the labor time needed to produce it, and in this case that means the labor time needed to produce the food, clothing, and shelter that keep the worker alive and able to work, plus an amount built up historically and shaped by custom, including what it costs to raise children who will become the next generation of workers. Marx describes the sphere where this bargain is struck in openly sarcastic terms, calling it a place of equal rights where buyer and seller of labor power meet as free and equal owners of property, each simply pursuing self interest as Bentham would describe it. He then notes that once the deal is struck, the appearance changes completely. The man who owned the money now walks ahead as the capitalist and the owner of labor power follows him into the workplace as his worker, because only inside production does the real difference between the two parties show itself.

Absolute and relative surplus value

Once labor power is bought, Marx asks how the surplus actually gets produced during the working day itself. He splits the working day into two parts: the hours in which the worker simply reproduces the value of his own wages, which Marx calls necessary labor, and the additional hours worked beyond that point, which produce surplus value for the capitalist. Lengthening the whole working day without changing how that split works is what Marx calls absolute surplus value, the oldest and crudest way of raising profit.

Relative surplus value works differently and does not require the working day to get any longer at all. If new machinery or methods let an industry produce the same goods in less labor time, the value of those goods falls, and if those goods belong to the basket of things workers typically buy to live on, then the labor time needed to reproduce a worker's own subsistence shrinks too. The necessary portion of the day gets shorter even though the total day stays the same length, so the surplus portion grows automatically. Marx illustrates this with a shoemaker who doubles his output through better tools, each pair of boots now embodies less labor than before, so the maker who gets there first can sell below the old price and still pocket an extra margin, at least until competitors catch up and the gain disappears into a new, lower general price. He treats this constant pressure to cut costs, and through cutting costs to cheapen the worker's own means of subsistence, as something built into capital, not an occasional abuse of it.

The Critique of the Gotha Programme

Later in his life Marx wrote a sharp commentary on the founding program of a newly unified German socialist party, meeting in the town of Gotha. He begins by pulling apart its opening claim that labor is the source of all wealth. Marx answers that nature is just as much a source of use values as labor is, and that labor only becomes productive when it is applied to natural materials that someone already controls as an owner, which is exactly the point a purely abstract slogan about labor conveniently skips over.

He spends much of the text attacking the program's promise that workers will receive the undiminished proceeds of their labor, distributed with equal right to all members of society. Marx walks through why this cannot be literal. Before anything is divided among individuals, a cooperative society would still have to set aside funds to replace used up means of production, to expand production further, to insure against accidents and natural disasters, and to cover the common costs of administration, schools, health care, and support for those unable to work. Only what remains after all of that gets divided among individual producers.

Even that remaining division, Marx argues, cannot escape a basic unevenness. In what he calls the first, lower phase of a communist society, newly emerged from capitalism and still marked by its habits, each worker reasonably receives back a claim on goods proportional to the labor he contributed, after deductions. But people differ in strength, skill, and family circumstances, one worker is unmarried, another has several children to feed, so an equal amount of labor rewarded equally still produces unequal actual living standards. Marx calls this an unequal right applied to unequal people, and insists it is unavoidable at this stage rather than a betrayal of socialist principles. Only in a higher phase, once the old divide between mental and physical labor has faded, once labor has become something people want to do rather than merely a way to survive, and once productive powers have grown enough that cooperative wealth flows abundantly, can society move past this narrow standard of right altogether and live by the rule each person contributes according to their ability and receives according to their needs. He also dismisses the program's faith that the state itself could hand down socialism through aid to worker cooperatives, arguing that it reverses the real relationship between the structure of society and the state built on top of it.

Theories of Surplus Value and the question of crisis

The third reading is drawn from Marx's extended critical engagement with earlier economists, focused here on his dispute with David Ricardo over whether a general glut, a crisis affecting the whole economy and not just one industry, is even possible. Ricardo, following Jean Baptiste Say, held that production essentially creates its own demand, since people only produce in order to exchange their output for other goods they want, so money is merely a convenient go between and a simultaneous oversupply across every commodity at once could never happen.

Marx treats this as a serious error built on a basic misreading of what a sale actually is. The moment a producer turns a commodity into money rather than directly into another useful thing, the single act of exchange splits into two separate acts, selling and buying, and nothing compels the person holding money from a sale to spend it again right away. That gap between selling and buying, Marx argues, is already the seed of crisis, present in the plain mechanics of a money economy even before anything resembling capitalist production exists. He develops this further by looking at money functioning as a means of payment through credit, where a whole chain of producers depend on each other settling bills in turn, so that one failure to pay can ripple backward through the entire chain and turn a local difficulty into something that looks like a general crisis.

He also returns to the relationship between production and consumption under capitalism specifically. Workers can only buy back a portion of what they collectively produce, since wages are kept to the value of labor power rather than to the full value workers create, which places a structural limit on how much of total output can be absorbed by the people who actually made it. Marx is scornful of economists who treat this as a minor technical puzzle, arguing instead that overproduction in one leading branch of industry drags related branches down with it, and that insisting a general glut is theoretically impossible mainly serves to excuse capitalism from scrutiny rather than to explain how it actually behaves.

Why these arguments still matter

Read together, these three pieces push against both of the other traditions covered in this course. Against Locke, Marx effectively asks what happens once most people own no land or tools to mix their labor with in the first place, so that the only thing left for them to sell is their own capacity to work, on terms set by whoever already owns the means of production. Against Bentham and Mill, Marx answers that an exchange can satisfy the formal conditions of a fair bargain between consenting parties and still rest on one side needing to sell its labor simply to survive, which is a very different thing from a free and equal transaction between two parties with real alternatives.

Sources: Karl Marx, Capital, Volume One (1867), the Preface to the first German edition and the preface to the French edition, Chapter 1 (Commodities), Chapter 4 (The General Formula for Capital), Chapter 6 (The Buying and Selling of Labor Power), Chapter 12 (The Concept of Relative Surplus Value), and Chapter 16 (Absolute and Relative Surplus Value). Karl Marx, Critique of the Gotha Programme (1875), in full. Karl Marx, Theories of Surplus Value, the sections on Ricardo's denial of general overproduction and the possibility of economic crisis.