Surplus product

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 Marx gave the concept a central place in his interpretation of economic history.

Marx divides the "social product" of society's labour force into the necessary product and the surplus product. The necessary product refers to the output 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.

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.

The existence of a surplus product 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 Marx's view, 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.

Marxian interpretation of the historical origin of the surplus product

For most of human prehistory, 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 or transport surpluses in large quantities reliably and securely 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 the neolithic revolution, i.e. the invention and spread of agriculture, possibly from about 10,000 years ago, 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, 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 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). He dates the first state-organized societies at about 3100 B.C. in Egypt and Mesopotamia.

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.

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. 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.

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. 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 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.

A socialist society 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. 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.

Specific to the surplus product within capitalist society 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. The creates a constant need to maintain and expand market demand.

(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. 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 productivity 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 the ability to consume services enhancing the quality of life.

(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.

In pre-capitalist society, "the economy" did not exist as a separate abstraction or reality, anymore than long-term mass unemployment existed. 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.

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.

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. 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. A physical surplus product is not the same as surplus value, and the magnitudes of surplus product, surplus labour and surplus value may diverge.

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.

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 suggests 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.
a consensual morality and sense of trust has broken down, 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.

Marxian scholars 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.

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 Net output value of production equals more than labour and materials costs. 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.

References

Robert J. Wenke, Patterns in Prehistory.
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.

http://www.istendency.net/node/view/7

Maurice Godelier, Perspectives in Marxist Anthropology.
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Lawrence Krader, Labor and value.
Roman Rosdolsky, "The Distribution of the Agrarian Product in Feudalism", in: Journal of Economic History (1951), pp. 247–265
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