This is the Marxian theory of surplus-value in a nutshell. Rent, interest, and profit, the three great divisions of capitalist income into which this surplus-value is divided, are thus traced to the exploitation of labor, resting fundamentally upon the ownership by the exploiting class of the means of production. Other economists, both before and since Marx, have tried to explain the source of capitalist income in very different ways. An early theory was that profit originates in exchange, through "buying cheap and selling dear." That this is so in the case of individual traders is obvious. If A sells to B commodities above their value, or buys commodities from him below their value, it is plain that he gains by it. But it is equally plain that B loses. If one group of capitalists gains what another group loses, the gains and losses balance each other; there is no gain to the capitalist class as a whole. Yet that is precisely what occurs—the capitalist class as a whole does gain, and gain enormously, despite the losses of individual members of that class. It is that gain to the great body of capitalists, that general increase in their wealth, which must be accounted for, and which exchange cannot explain. Only when we think of the capitalist class buying labor-power from outside its own ranks, generally at its natural value, and using it, is the problem solved. The commodity which the capitalist buys creates a value greater than its own in being used up.
The theory that profit is the wages of risk is answerable in substantially the same way. It does not in any way explain the increase in the aggregate wealth of the capitalist class to say that the individual capitalist must have a chance to receive interest upon his money in order to induce him to turn it into capital, to hazard losing it wholly or in part. While the theory of risk helps to explain some features of capitalism, the changes in the flow of capital into certain forms of investment, and, to some small extent, the commercial crises incidental thereto, it does not explain the vital problem, the source of capitalist income. The chances of gain, as a premium for the risks involved, explain satisfactorily enough the action of the gambler when he enters into a game of roulette or faro. It cannot be said, however, that the aggregate wealth of the gamblers is increased by playing roulette or faro. Then, too, the risks of the laborers are vastly more vital than those of the capitalist. Yet the premium for their risks of health and life itself does not appear, unless, indeed, it be in their wages, in which case the most superficial glance at our industrial statistics will show that wages are by no means highest in those occupations where the risks are greatest and most numerous. Further, the wages of the risks for capitalists and laborers alike are drawn from the same source, the product of the laborers' toil.
To consider, even briefly, all the varied theories of surplus-value other than these would be a prolonged, dull, and profitless task. The theory of abstinence, that profit is the just reward of the capitalist for saving part of his wealth and using it as a means of production, is answerable by a priori arguments and by a vast volume of facts. Abstinence obviously produces nothing; it can only save the wealth already produced by labor, and no automatic increase of that saved-up wealth is possible. If it is to increase without the labor of its owner, it can only be through the exploitation of the labor of others, so that the abstinence theory in no manner controverts the Marxian position. On the other hand, we see that those whose wealth increases most rapidly are not given to frugality or abstinence by any means. It may, certainly, be possible for an individual to save enough by practicing frugality and abstinence to enable him to invest in some profitable enterprise, but the source of his profit is not his abstinence. That must be sought elsewhere. Abstinence may provide him with the means for taking the profit, but the profit itself must come from the value created by human labor-power over and above its cost of production.
Still less satisfactory is the idea that surplus-value is nothing more than the "wages of superintendence," or the "rent of ability." This theory has been advocated with much specious argument. Essentially it involves the contention that there is no distinction between wages and profits, or between capitalists and laborers; that the capitalist is a worker, and his profits simply wages for his useful and highly important work of directing industry. It is a bold theory with a very small basis of fact. Whoever honestly considers it, must, one would think, see that it is both absurd and untrue. Not only is the larger part of industry to-day managed by salaried employees who have no part, or only a very insignificant part, in the ownership of the concerns they manage, but the profits are distributed among shareholders who, as shareholders, have never contributed service of any kind to the industries in which they are shareholders. Whatever services are performed, even by the figure-head "dummy" directors of companies, are paid for before profits are considered at all. This is the invincible answer to such criticisms as that of Mr. Mallock, that Marx and his followers have not recognized "the functions of the directive ability of the few." When all the salaries of the directing "few" have been paid, as well as the wages of the many, and the cost of all materials and maintenance of machinery, there remains a surplus to be distributed among those who belong neither to the "laboring many" nor the "directing few." That profit Mr. Mallock cannot explain away. Marx himself, in "Capital," called attention to the "directing ability of the few," quite as clearly as Mr. Mallock has done. He first shows how the "collective power of masses" is really a new creation; that it involves a special kind of leadership, or directing authority, just as an orchestra does; then he proceeds to point out the development of a special class of supervisors and directors of industry, "a special kind of wage laborer.... The work of supervision becomes their established and exclusive function."[178] Socialists, contrary to Mr. Mallock, have not overlooked the function exercised by the directing few, but they have pointed out that when these have been paid, their salaries being sometimes almost fabulous, there is still a surplus-value to be distributed among those who have not shared in the production, either as mental or manual workers. As Mr. Algernon Lee says:—
"The profits produced in many American mills, factories, mines, and railway systems go in part to Englishmen or Belgians or Germans who never set foot in America, and who obviously can have no share in even the mental labor of direction. A certificate of stock may belong to a child, to a maniac, to an imbecile, to a prisoner behind the bars, and it draws profit for its owner just the same. Stocks and bonds may lie for months or years in a safe-deposit vault, while an estate is being disputed, before their ownership is determined; but whoever is declared to be the owner gets the dividends and interest "earned" during all that time."[179]
It is an easy task to set up imaginary figures labeled "Marxism," and then to demolish them by learned argument—but the occupation is as fruitless as it is easy. It remains the one central fact of capitalism, however, that a surplus-value is created by the working class and taken by the exploiting class, from which develops the class struggle of our time.
FOOTNOTES:
[163] The People's Marx, by Gabriel Deville, page 288.
[164] Capital, Vol. I, Kerr edition, page 41.
[165] Professor J. S. Nicholson, a rather pretentious critic of Marx, has called sunshine a commodity because of its utility, Elements of Political Economy, page 24. Upon the same ground, the song of the skylark and the sound of ocean waves might be called commodities. Such use of language serves for nothing but the obscuring of thought.