Surplus product
Surplus product 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.
Notions of "surplus produce" have been used in economic thought and commerce for a long time, 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, political anthropology, cultural anthropology, and economic anthropology.
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,.
Classical economics
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 economic growth.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—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. 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. 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.
Marx's definition
In Das Kapital and other writings, Marx divides the new "social product" of the working population 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. 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.
- A society must usually also hold a fraction of the new social product in reserve at any time. These reserves 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.
- 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.
Use
In producing, people must continually maintain their assets, replace assets, and consume things 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 or otherwise transferred to or from others
- reinvested
Economic growth
If the surplus product is simply held in reserve, wasted or consumed, no economic growth occurs. Only when the surplus is traded and/or reinvested does it become possible to increase the scale of production. For most of the history of urban civilisation, excess foodstuffs were the main basis of the surplus product, whether appropriated through trade, tribute, taxation, or some other method.Surplus labour
In Marxism, the existence of a "surplus product" normally assumes the ability to perform surplus labour, i.e. extra labour beyond that which is necessary to maintain the direct producers and their family dependents at the existing standard of life. In Capital, Vol. 1, chapter 9, section 4, Marx actually defines the capitalist surplus product exclusively in terms of the relationship between the value of necessary labour and surplus labour; at any one time, this surplus product is lodged simultaneously in money, commodities, and claims to labour-services, and therefore is not simply a "physical" surplus product.Economy of time
In Marx's view, as he expresses it in the Grundrisse 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.Human needs
The corollary of increasing wealth in society, with rising productivity, is that human needs and wants expand. Thus, as the surplus product increases, the necessary product per person also increases, which usually means an increase in the standard of living. In this context, Marx distinguishes between the physical minimum requirements for the maintenance of human life, and a moral-historical component of earnings from work.This distinction is however somewhat deceptive, for several reasons.
- in more complex societies at least, minimum living costs involve social and infrastructural services, which also incur costs, and which are not optional from the point of view of survival.
- Which goods can be considered "luxuries" is not so easy to define. For example, owning a car may be considered a luxury, but if owning a car is indispensable for travelling to work and to shops, it is a necessity.
- Michael Hudson points out that in the modern United States, households spent only about a quarter of their income on directly purchasing consumer goods and consumer services. All the rest is spent on payments of interest, rents, taxes, loans, retirement provisions and insurance payments. Some of these financing payments could be considered "moral-historical" but some of them are a physical requirement since without them, people could die.
Marxian interpretation of the historical origin
The main reasons were:
- 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 Marshall Sahlins 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.
- 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.