Marx's Surplus Value Theory

Answered by Andrew Bissell

Rand was unique among defenders of capitalism in that she did not concede the altruist assertion that man’s life belongs to his society or community. She therefore parts with the traditional thinkers who believe capitalism is best because it is the social system that provides “the greatest good for the greatest number.” Objectivism holds that capitalists do not exist for the sake of wage laborers, and wage laborers do not exist for the sake of capitalists—rather, both should interact on the basis of voluntary trade free of physical force. Also, although the principle of non-initiation of force is a political principle, it follows from the Objectivist ethical view that man’s life is his own, and that each man should pursue his own interests and values, neither living for the sake of others nor asking them to live for his own.

When Marx looks at humanity, he does not see individual human beings coming together for cooperation and trade. Instead, he sees two huge, warring classes, the capitalists (bourgeois) and the workers (proletariat), into which any specific human being can be easily categorized. Since he was the self-appointed defender of the workers, Marx found it necessary to deny the contributions made by factory owners, industrialists, and entrepreneurs. Thus he arrived at the labor theory of value, which is the basis of his exploitation theory.

The labor theory of value holds that physical labor is the only real source of wealth. Capital itself—land, factories, ports, railroads, etc.—represents simply “stored” labor, since it was, at some point, constructed by wage employees. According to Marx, even “human capital,” the education and skills of trained professionals like doctors and lawyers, is a form of stored labor, since at some point those individuals received their education from laborers. In the Marxist worldview, the factory owners and fat cats simply sit back and watch the money roll in, never contributing one iota to the production process.

The problem with the Marxian exploitation theory, as with so many other failed political and economic theories, is that it rests on false premises, most notably the labor theory of value itself. Sheer physical force and labor are of little use if they are not directed by careful thought so as to contribute most efficiently to human well-being. True, it takes labor to construct a factory, but throwing 100 directionless men into a lot with some steel girders, tools and their own muscles—and with no plan, blueprint, or leadership—will not yield anything that contributes meaningfully to production. This is the critical function performed by capitalists: organizing production according to better systems and techniques so that the same amount of labor can produce vastly more goods. And it is not easy; the wealthiest and most successful businessmen work long hours or stay up nights thinking of new ways to expand output.

“Bourgeois” was Marx’s catch-all ad hominem slur used to dismiss any argument he found difficult or inconvenient. He dismissed entire systems of thought from the Western canon because they had allegedly been conceived by “bourgeois” theorists trying to excuse their own rapacious exploitation and greed. The classical economists argued that free markets were the best way to advance human interests? John Locke and Thomas Jefferson had articulated political theories of individual rights? Why, they were all just bourgeois apologists! One can still hear this Marxist refrain in modern political thought—any time someone tries to excuse himself from addressing an opponent’s arguments by saying, “Well, he’s just in the pay of the oil or tobacco or insurance companies.”—or in modern historical discussions, whenever the Founding Fathers are smeared as rich dead white men out to protect their own holdings.

Marx often tried to blur the difference between economic and political power, to argue that those who command large fortunes have an authority that is qualitatively very similar to those who command armies. But the initiation of force refers specifically to actual, physical force, not, for instance, refusing to provide someone with a job or a roof over his head. Ayn Rand dramatically states this point in Francisco D’Anconia’s money speech from Atlas Shrugged: “The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide—as, I think, he will.” (p. 391, paperback edition)

Objectivism acknowledges that people are individuals, and do not fit easily into arbitrary categories like “bourgeois” and “proletariat.” They can even—at least in a free society—move from one category or social station to another, and often do. It is only under capitalism—and not the various forms of collectivism and statism—that an individual is freed from the power of the whims of bureaucrats or the random chance of his family name to determine how far he can go and how much he can achieve.

In a laissez-faire society, each man succeeds to the degree that he thinks. True, we are all limited in some way by our natural faculties and talents. Nevertheless, the development of the abilities necessary for success in a capitalist system—the degree to which we benefit from these inborn strengths—is a matter of one’s personal choices: to apply oneself in school or to drift through it aimlessly; to labor diligently at work or perform only the bare minimum; in essence, to think or to evade.

Individualism—not a false bourgeois/proletariat dichotomy—is at the heart of the Objectivist ethics and the government of freedom and laissez-faire capitalism which is its logical consequence.