The surplus value, according to Karl Marx is the new value that the workers create in addition to their own labor cost and that which is available for appropriation by the capitalist. It allows for making profit and is the foundation for capital accumulation. This concept of surplus theory was developed and written by Karl Marx, but the term is not invented by him.
According to Marx, from the 19th century, there has been an excessive increase in population and wealth which is because of the competitive endeavor for obtaining maximum surplus value from employing labor that resulted in greater increase of capital resources and productivity.
Total surplus value in an economy refers to the total of net distributed and undistributed profit, net rents, net interest, net tax on production and other net receipts related to licensing, royalties, leasing, etc. however, the gross and net profit income in social accounting may be different from the way it is done in individual business.
Marx’s discussions were mainly centered on profit, rent and interest. He overlooked taxation, royalties and other such things because during his time, these components contributed little to national income. However, in the last 150 years, the scenario has changed as the state’s role in the economy has increased in most of the countries.
Different ways of viewing surplus value
- It is viewed as an element of the new value product which is defined by Karl Marx as equal to the total of labor costs and surplus value.
- It is viewed as the source of investment fund or accumulation fund of the society. Some part of it is used for re-investment and the other part is considered as personal income and consumed by the owners.
- It may be viewed as the monetary valuation of surplus labor or social relation of production.
- Surplus value can be viewed as a net income flow which is put to appropriation by the owners of capital for asset ownership which comprises of distributed personal income as well as undistributed business income.
- In developed and capitalist economy, it can be viewed as a pointer of social productivity’s level which is reached by working population.
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