Surplus product

Surplus product (German: Mehrprodukt) is a concept theorised by Karl Marx in his critique of political economy. Roughly speaking, it is the extra goods produced above the amount needed for a community of workers to survive at its current standard of living. Marx first began to work out his idea of surplus product in his 1844 notes on James Mill's Elements of political economy.^[1]

Not to be confused with Surplus value.

Notions of "surplus produce" have been used in economic thought and commerce for a long time (notably by the Physiocrats), but in Das Kapital, Theories of Surplus Value and the Grundrisse Marx gave the concept a central place in his interpretation of economic history. Nowadays the concept is mainly used in Marxian economics,^[2] political anthropology, cultural anthropology, and economic anthropology.^[3]

The frequent translation of the German "Mehr" as "surplus" makes the term "surplus product" somewhat inaccurate, because it suggests to English speakers that the product referred to is "unused", "not needed", or "redundant", while most accurately "Mehr" means "more" or "added"—thus, "Mehrprodukt" refers really to the additional or "excess" product produced. In German, the term "Mehrwert" most literally means value-added, a measure of net output, (though, in Marx's particular usage, it means the surplus-value obtained from the use of capital, i.e. it refers to the net addition to the value of capital owned).^[4]

Classical economics[edit]

In Theories of Surplus Value, Marx says in classical economics the "surplus" referred to an excess of gross income over cost, which implied that the value of goods sold was greater than the value of the costs involved in producing or supplying them. That was how you could "make money". The surplus represented a net addition to the stock of wealth. A central theoretical question was then to explain the kinds of influences on the size of the surplus, or how the surplus originated, since that had important consequences for the funds available for re-investment, tax levies, the wealth of nations, and (especially) economic growth.^[5]

This was theoretically a confusing issue, because sometimes it seemed that a surplus arose out of clever trading in already existing assets, while at other times it seemed that the surplus arose because new value was added in production. In other words, a surplus could be formed in different ways, and one could get rich either at the expense of someone else, or by creating more wealth than there was before, or by a mixture of both. This raised the difficult problem of how, then, one could devise a system for grossing and netting incomes & expenditures to estimate only the value of the new additional wealth created by a country. For centuries, there was little agreement about that, because rival economists each had their own theory about the real sources of wealth-creation^[6]—even if they might agree that the value of production must equal the sum of the new revenue which it generates for the producers.

Political economy was originally considered to be a "moral science", which arose out of the moral and juridical ambiguities of trading processes themselves.^[7] It was analytically difficult to take the step from the incomes of individuals, the immediate source of which was rather obvious, to a consideration of the incomes of groups, social classes and nations.^[8] Somehow, a "system of transactors" showing aggregate sales and purchases, costs and incomes had to be devised, but just exactly how that system was put together, could differ a great deal, depending on "from whose point of view" the transactions were considered. The Physiocratic school, for example, believed that all wealth originated from the land, and their social accounting system was designed to show this clearly.^[9]

A society must usually also hold a fraction of the new social product in reserve at any time. These reserves (sometimes called "strategic stocks") by definition are not usually available for immediate distribution, but stored in some way, yet they are a necessary condition for longer-term survival. Such reserves must be maintained, even if no other excess to immediate requirements is produced, and therefore they can be considered a permanent reproduction cost, viewed over a longer interval of time, rather than as a true surplus.

An additional complicating factor is population growth, since a growing population means that "more product" must be produced purely to ensure the survival of that population. In primitive societies, insufficient output just means that people will die, but in complex societies, continually "producing more" is physically necessary to sustain a growing population (this is admitted by Marx in Capital, Volume III, chapter 48 where he writes: "A definite quantity of surplus labour is required as insurance against accidents, and by the necessary and progressive expansion of the process of reproduction in keeping with the development of the needs and the growth of population, which is called accumulation from the viewpoint of the capitalist").

At any time, a fraction of the adult working-age population does not work at all, yet these people must somehow be sustained as well. Insofar as they do not depend directly on the producers of the necessary product for their maintenance, they have to be sustained from communal or state resources, or by some other means.

In Das Kapital and other writings, Marx divides the new "social product" of the working population (the flow of society's total output of new products in a defined time-interval) into the necessary product and the surplus product. Economically speaking, the "necessary" product refers to the output of products and services necessary to maintain a population of workers and their dependents at the prevailing standard of life (effectively, their total reproduction cost). The "surplus" product is whatever is produced in excess of those necessaries. Socially speaking, this division of the social product reflects the respective claims which the labouring class and the ruling class make on the new wealth created.

Strictly speaking, however, such an abstract, general distinction is a simplification, for at least three reasons.

The concept of a social surplus product seems very simple and straightforward at first sight, but for social scientists it is actually a quite complex concept. Many of the complexities are revealed when they try to measure the surplus product of a given economic community.^[10]

destroyed, or wasted

held in reserve, or hoarded

consumed

traded or otherwise transferred to or from others

reinvested

[12]

that techniques were lacking to store, preserve, and package surpluses securely in large quantities or transport them reliably in large quantities 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 themselves, never mind maximising their production of output. Thus, for example, the anthropologist estimated that the utilization by tribes of the "carrying capacity" of their habitat ranged from 7% among the Kuikuro of the Amazon basin to about 75% among the Lala of Zambia.^[19]

Marshall Sahlins

different groups of people usually did not depend on trade for their survival, and the total amount of trading activity in society stayed proportionally small.

The surplus product itself no longer consists simply of "physical" surpluses or tangible , 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. 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.

use-values

There is an increasingly strong connection between the surplus product and , 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).

surplus value

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. This creates a constant need to maintain and expand market demand, and a growing world market for products and services.

Competition between many different private enterprises exerts a strong compulsion to (invest) a large part of the surplus product to maintain and improve market position, rather than consume it. Failure to do so would drive business owners out of business. For Marx, this was the main cause behind the gigantic increase in economic growth during the 19th century.

accumulate

The corollary of the enormous increase in physical productivity (output of goods) is that a larger and larger component of the social product, valued in money prices, consists of the and consumption of services. This leads to a redefinition of wealth: not just a stock of assets, but also the ability to consume services enhancing the quality of life (note: many activities called "services" supply tangible products).

production

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 practices. At the same time, the ownership of wealth becomes strongly concentrated, shutting out huge masses of people from owning any significant assets.

dumping

The bourgeoisie as a ruling class is historically rather unusual, because it emerges and exists separately from the state, rather than being the state (like many earlier ruling classes). The different and competing fractions of the bourgeoisie mandate others (usually professional middle-class people, such as lawyers and economists) to govern for them as a "political class" or polity; the bourgeoisie itself is mainly preoccupied with doing business. Ordinarily, the business class gets rich from business, and not from imposing taxes and tributes themselves (that would often be regarded as a criminal protection racket, not valid trade). The bourgeois state typically lacks ownership of an independent economic base sufficient to self-finance its own activities; it perpetually depends on levying taxes with consent of the population, and on loans from the bourgeoisie. With the bourgeois state, taxpayers have the possibility of electing their own representatives to state office, which means that they can in principle influence the taxation system and the justice system generally. That possibility has rarely existed in non-capitalist states; there, any criticism of the state means that the critic is fined, imprisoned or killed.

what and how much was produced in a year,

what the structure is,

population

what or earnings were received,

incomes

how many hours were worked in different ,

occupations

what the normal actual pattern is,

consumption

what the producers pay in terms of or tribute

taxes

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:

then measures of the necessary product and surplus product can in principle be estimated.^[41]

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. In Das Kapital, 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. The existence of markets always presupposes a lot of non-market labour as well. A physical surplus product is not the same as surplus value, and the magnitudes of surplus product, surplus labour and surplus value may diverge.

Social valuation of labour[edit]

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 (i.e. volunteered) 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.

The gap between what is produced and what could potentially (or technically) be produced (sometimes called the " gap" or "output gap") grows sharply.

GDP

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. The ruling elite no longer cares for the welfare of the population it rules, and may be divided within itself.

A consensual morality and sense of trust has broken down, criminality increases, 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 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 a 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 & Engels suggest in The German Ideology that in this case the productive forces are transformed into destructive forces.^[42]

According to Marxian theory,^[43] decaying or decadent societies are defined mainly by the fact that:

Marxian scholars such as Ernest Mandel argued 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. According to Herbert Marcuse, a society is "sick" if its basic institutions and relationships are such that they make it impossible to use resources for the optimal development of human existence.^[44]

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.

At the simplest level, it is argued that in trade, one man's gain is 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? It is not difficult to show that the gains and losses may not balance out, leading to economic crises, but many arguments have been given to show that there are only "coincidental" or "temporary" surpluses of some kind. Yet, peculiarly, even on a crude estimate of , the gross output value of production equals more than the value of labour and materials costs. If a surplus does not exist, it becomes difficult to explain how economic growth (the growth of output) can occur, and why there was more to distribute than there had been (see surplus-value). Somehow, more comes out of production than went into it. The answer is that much of surplus comes out of human labor, which is a 'renewable resource'; the first form of surplus in many societies, excess food, comes from innovations in agriculture that allow farmers to produce more than they will consume.

value added

The denial that a surplus product exists, therefore tends to focus more on the exact definition of it, i.e. "surplus" in relation to what exactly? For example, is undistributed profit really a "surplus", or is it a cost of production? Some ecologists also argue that we should produce no more than we really need, in an ecologically responsible way. This raises the question of how we can objectively know whether something is really "surplus" or not—at best we can say that something is surplus relative to a given set of verifiable human needs, conditions, uses or requirements. In this sense, Siegfried Haas argues for example that surplus is the quantity of natural and produced goods that remains in a society after a year (or other defined time period) when basic biological needs are met and social or religious obligations are fulfilled.^[46] Anthropologist Estellie Smith defines the surplus as "the retained resources of production minus consumption" or as ""material and non-material resources in excess of what is culturally defined as the current optimum supply".^[47]

[45]

Another type of criticism is that the very notion of surplus product is purely relative and circumstantial, or even subjective, because any person can regard something as a 'surplus' if he has command or effective control over it, and is in a position where he can use it in whatever manner he thinks appropriate—even although others would not regard it as "surplus" at all. In this sense, it might appear as though the concept of "surplus product" is primarily a moral concept referring to a propensity of human beings "to reap where they did not sow", whether criminally/immorally, with a legally tolerated justification, or by asserting brute power.