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Surplus product (German: Mehrprodukt) is an economic concept explicitly theorised by Karl Marx in his critique of political economy. 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 (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, 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, (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).
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.
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.
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.
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:
Thus, for a simple example, surplus seeds could be left to rot, stored, eaten, traded for other products, or sown on new fields. But if, for example, 90 people own 5 sacks of grain, and 10 people own 100 sacks of grain, it would be physically impossible for those 10 people to use all that grain themselves—most likely they would either trade that grain, or employ other people to farm it. Since 5 sacks of grain are insufficient for 90 people, it is likely that the 90 people would be willing to work for the 10 people who own more grain than they can consume, in order to get some extra grain.
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 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.
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 (goods), and claims to labour-services, and therefore is not simply a "physical" surplus product (a stockpile of additional goods).
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.
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.
For most of human prehistory, Marxian writers like Ernest Mandel and V. Gordon Childe argued, there existed no economic surplus product of any kind at all, except very small or incidental surpluses.
The main reasons were:
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 and surpluses exist, tribes can diversify their production, and members can specialise in producing tools, weapons, containers, and ornaments. Modern archaeological findings show that this development actually began in the more complex hunter-gatherer (foraging) societies. The formation of a reliable surplus product makes possible an initial technical or economic division of labour in which producers exchange their products. In addition, a secure surplus product makes possible population growth, i.e. less starvation, infanticide, or abandonment of the elderly or infirm. Finally, it creates the material basis for a social hierarchy, where those at the top of the hierarchy possess prestige goods which commoners do not have access to.
The first real "take off" in terms of surpluses, economic growth, and population growth probably occurred during what V. Gordon Childe called the neolithic revolution, i.e. the beginning of the widespread use of agriculture, from about 12,000 to 10,000 years ago onward, at which time the world population is estimated to have been somewhere between 1 and 10 million.
Archaeologist Geoffrey Dimbleby comments:
"It has been calculated that if man had never progressed beyond the hunting and food-gathering stage, the maximum population which the world's surface could support at any one time would be 20–30 million people."
As regards extraction of a surplus from the working population (whether as a tax, a tribute, a rent or some other method), modern anthropologists and archaeologists distinguish between "staple finance" and "wealth finance". They do not like the term "surplus product" anymore, because of its Marxist connotations and definitional controversies, but it boils down to the same thing.
The system of surplus-extraction might also be a mix of staple finance and wealth finance. The use of the term "finance" for the appropriation of a surplus is just as troublesome as the term "surplus product". Commoners required to pay a levy, tax or tribute to the landowners, on pain of imprisonment or death, obviously are not making an "investment" for which they get a return, but instead are forced to pay the cost of using a piece of land they do not own.
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. As Ashley Montagu puts it, "barter, trade, and commerce largely depend on a society's exchangeable surpluses." One group in society utilizes its position in society (e.g. the management of reserves, military leadership, religious authority, etc.) to gain control over the social surplus product; as the people in this elite group assert their social power, everyone else is forced to leave the control over the surplus product to them. Although there is considerable controversy and speculation among archaeologists about how exactly these early rulers came to power (often because of a lack of written records), there is good evidence to suggest that the process does occur, particularly in tribal communities or clans which grow in size beyond 1,500 or so people.
From that point on, the surplus product is formed within a class relationship, in which the exploitation of surplus labour combines with active or passive resistance to that exploitation.
To maintain social order and enforce a basic morality among a growing population, a centralized state apparatus emerges with soldiers and officials, as a distinct group in society which is subsidized from the surplus product, via taxes, tributes, rents and confiscations (including war booty). 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 naturally entitled to appropriate more resources than others. Archaeologist Chris Scarre comments:
"There has been some debate as to whether states should be considered beneficent institutions, operating for the good of all, or whether they are essentially exploitative, with governing elites gaining wealth and power at the expense of the majority. For most documented examples, the latter seems closer to reality. In terms of scale, however, it is only with the benefit of centralized state control that large populations can be integrated and supported; the collapse of states... is inevitably followed by population decline."
Archaeologist Bruce G. Trigger comments:
"It appears that, regardless of the agricultural regime followed, between 70 and 90 percent of the labour input in early civilizations was, of necessity, devoted to food production. This means that all early civilizations had to remain predominantly agricultural. It also means that the surplus resources available to the upper classes were never large in relation to total production and had to be used carefully. Because of this, strategies for increasing revenue had to be mainly political: increasing the number of farmers controlled, creating situations in which ruling groups shared available resources more disproportionately according to rank, or persuading farmers to surrender marginally greater amounts of surplus production without increasing the cost of the mechanisms needed to ensure social control."
Given the rather low labour-productivity of agrarian societies, a proportionally large amount of (surplus-)labour was needed in the ancient world to produce a relatively small amount of physical surplus.
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".
According to Gil Stein, the earliest known state organizations emerged in Mesopotamia (3700 BC), Egypt (3300 BC), the Indus Valley (2500 BC) and China (1400 BC). In various parts of the world, e.g. Africa and Australasia, tribal societies and chiefdoms persisted for much longer before state formation occurred. Many modern states originated out of colonialism. For example, the British empire at its largest contained a quarter of the world population. Many of the colonized countries originally did not have a state apparatus, only chiefdoms.
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 socioeconomic 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."
But it would be erroneous to simply infer the pattern of socioeconomic inequality from the size of the surplus product. That would be like saying, "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 governing legitimate cooperation and competition. The wealth of some may depend on the poverty of others.
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 (the system of property rights and distributing wealth that it has). 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 money terms, the world's 1,100 richest people have almost twice the assets of the poorest 2.5 billion people representing 40% of the world population. In his famous book Capital in the Twenty-First Century, Thomas Piketty suggests that if present trends continue, there will be an even more gigantic concentration of wealth in the future.
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.
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, for example, 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 very 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 form of human society in which all could live to their potential, because there was enough to satisfy all human needs for everybody.
Economic historian Paul Bairoch comments:
"...in traditional societies the average agricultural worker produced an amount of foodstuff only about 20 to 30% in excess of his family's consumption. ... These percentages—this 20 to 30% surplus—acquire special meaning if we take into account a factor often omitted from theories of economic development, namely, the yearly fluctuations of agricultural yields, which even at a national level could amount to an average of over 25%. Consequently, periodical subsistence crises became inevitable, crises greater or less in degree but which at their worst could produce a decline in economic life and hence in the civilisation it supported. For this reason, as long as agricultural productivity had not progressed beyond that stage, it was practically impossible to conceive of a continuous progress in the development of civilisations, let alone of the accelerated scientific and technical progress that is an essential characteristic of modern times. The profound changes in the system of agricultural production that preceded the industrial revolution brought that particular deadlock to an end. The consequent increase in productivity led in the space of 40 to 60 years to the transition from an average surplus of the order of 25% to something more like 50% and over, thus surpassing—for the first time in the history of mankind—what might be called the risk-of-famine limit; in other words, a really bad harvest no longer meant, as in the past, serious shortage or actual famine. The agricultural revolution... prepared the way for the industrial revolution."
Economic historian Roberto Sabatino Lopez adds that:
"Though most farmers and peasants individually produced very little surplus, the aggregated surplus of millions of agricultural workers was easily enough to support a large number of towns and to foster the development of industry, commerce and banking. Much as they admired agriculture and depended on it, the Romans literally identified "civilization" with cities (civitates)."
Specific to the surplus product within capitalist society, as Marx discusses in Das Kapital, are these main aspects (among others):
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, any more than long-term mass unemployment existed (other than in exceptional cases, such as wars or natural disasters). It is only when the "cash nexus" mediates most resource allocation, that "the economy" becomes viewed as a separate domain (the domain of commercial activity), quantifiable by means of money-prices.
A socialist society, Marxian economists argue, also has a surplus product from an economic point of view, insofar as more is produced than is consumed. Nevertheless, the creation and distribution of the surplus product would begin to operate under 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. 20th century 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.
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.
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.
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.
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.
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.
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.
In V. Gordon Childe's scheme the social surplus exists first, and then the ruling class arises to exploit this surplus. This view assumes that there exists a set quantity of stuff that is needed for social reproduction, and that once primary producers make more than this amount, they have produced a social surplus. There does not, however, exist a set amount of stuff that is necessary for social or biological reproduction. The amount and quality of calories, protein, clothing, shelter, education, and other things needed to reproduce the primary producers can vary enormously from time to time and place to place. The division between necessary and surplus labour reflects an underlying relationship, class, when one group, an elite class, has the power to take labor or the products of labor from another, the primary producers. This relationship defines social surplus".
The principal difficulty with [Gordon Childe's] theory is that agriculture does not automatically create a food surplus. We know this because many agricultural peoples of the world produce no such surplus. Virtually all Amazonian Indians, for example, were agricultural, but in aboriginal times they did not produce a food surplus. That it was technically feasible for them to produce such a surplus is shown by the fact that, under the stimulus of European settlers' desire for food, a number of tribes did raise manioc in amounts well above their own needs, for the purpose of trading. Thus the technical means for generating a food surplus were there; it was the social mechanisms needed to actualize it that were lacking.
Adam Smith found the origin of the division of labour in the "natural" human propensity to truck, barter and exchange. He stated that "the certainty of being able to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he may have occasion for, encourages every man to apply himself to a particular occupation, and to cultivate and bring to perfection whatever talent or genius he may possess for that particular species of business".
In Marx's view, commercial trade powerfully stimulated the growth of a surplus product, not because the surplus product is itself generated by trade, or because trade itself creates wealth (wealth has to be produced before it can be distributed or transferred through trade), but rather because the final purpose of such trade is capital accumulation, i.e. because the aim of commercial trade is to grow richer out of it, to accumulate wealth. If traders did not get an income out of trading (because their sales revenue exceeds their costs) they would not engage in it. Income growth can, ultimately, only occur if the total stock of assets available for distribution itself grows, as a result of more being produced than existed before. The more surplus there is, the more there is that can be appropriated and traded in order to make money out of it. If people just consume what they produce themselves, other people cannot get rich from that.
Thus, because the accumulation of capital normally stimulates the growth of the productive forces, this has the effect that the size of the surplus product which can be traded will normally grow also. The more the trading network then expands, the more complex and specialized the division of labour will become, and the more products people will produce which are surplus to their own requirements. Gradually, the old system of subsistence production is completely destroyed and replaced with commercial production, which means that people must then necessarily trade in order to meet their needs ("market civilization"). Their labour becomes social labour, i.e. co-operative labour which produces products for others—products which they don't consume themselves.
It is, of course, also possible to amass wealth simply by taking it off other people in some way, but once this appropriation has occurred, the source of additional wealth vanishes, and the original owners are no longer so motivated to produce surpluses, simply because they know their products will be taken off them (they no longer reap the rewards of their own production, in which case the only way to extract more wealth from them is by forcing them to produce more). It's like killing the goose that lays the golden egg.
In The Wealth of Nations Adam Smith had already recognized the central importance of the division of labour for economic growth, on the ground that it increased productivity ("industriousness" or "efficiency"), but, Marx suggests, Smith failed to theorize clearly why the division of labour stimulated economic growth.