GOODWILL: CONCEPT, KARL MARX, TYPES AND EXAMPLES - ECONOMY - 2025

The capital gain is the term that refers to the surplus produced beyond what is required to survive, it becomes profit. Therefore, they are the financial gains that a company, organization or legal person obtains from its business activities.

The idea of ​​surplus value was proposed by the German philosopher Karl Marx in his various works, including his famous book, Capital (1867). Marx believed that work was fundamental to all value created in any economy and that poorly paid work was the source of all profit for capitalists.

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However, critics have dismissed Marx's theory arguing that profit is the reward that capitalists enjoy for risking their capital when making investments. To prove this, they point to the losses suffered by capitalists as a result of poor investment decisions.

The advance of capitalism is defined by the constant increase in the rate of surplus value, which is the relationship between the amount of surplus value and capital, or between the excess labor time and the necessary labor time.

Capital gain concept

When capitalists buy labor power, it becomes a commodity that is consumed by putting it to work in a production process. This work creates commodities of greater value than the value of labor power. Capitalists buy labor, but they get work.

When they sell these goods they recover the costs incurred (wages, raw materials, depreciation of machinery) and more. This "plus" is surplus value, the difference in value between the labor force and the work it does.

Therefore, the surplus value is that part of the total value of the merchandise in which an excess or unpaid work of the worker was carried out, called profit.

Distribution of capital gains

The capitalist employer does not take all the surplus value. The land privilege allows the landlord to take a portion of that surplus value, under the name of rent, whether the land is used for agricultural facilities or for any other productive purpose.

On the other hand, the fact of owning the work teams enables the capitalist employer to produce a surplus value. This enables the capitalist lender to claim for himself another part of that capital gain under the name of interest.

Thus, for the capitalist employer, only what is called commercial profit remains as surplus value.

Capital gains according to Karl Marx

Karl Marx

Marx's theory of surplus value is derived from his theory of value and has four key elements:

- All goods are exchanged as equivalent in value.

- Although workers do not have direct access to the means of production, they have the freedom to sell their labor power to survive.

- Like all merchandise, the labor force has a value.

- Employers make an equivalent exchange with workers, who agree to work a specific period of time in exchange for the full value of their labor power.

The key to surplus value is the excellent ability of the labor force, in an equivalent exchange system, to produce in one working day more value than the value exchanged for the worker's labor force.

According to Marx, labor power is the only source of surplus value. Hence, workers and their labor force are the source of surplus value in capitalist societies.

Unlike classical capitalist economists, who only tangentially mentioned surplus value, Marx understood that this was the basis of capitalist profit.

Marx thought that his theory of surplus value was his most significant contribution to the development of economic analysis.

Types of capital gains

Absolute capital gain

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It results from prolonging the working day beyond the working time necessary for the worker to be able to reward the value of his workforce.

Motivated by the desire to increase surplus value, capitalists do everything possible to extend the working day. However, as their level of organization improves, workers win laws that limit working hours.

Absolute capital gains also increase as a consequence of increasing work intensity, even if the length of the working day remains the same or is shortened.

Relative goodwill

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The creation of surplus value can be increased without changing the length of the working day, by reducing the necessary working time, with a corresponding increase in excess working time.

The reduction in necessary labor time is mainly related to the increase in productivity in the industrial branches that produce the means of subsistence for workers, because this leads to a decrease in the value of labor power.

This in turn leads to a reduction in required labor time and a corresponding increase in excess labor time in all branches of industry.

Examples of goodwill

Example 1

Suppose a worker is hired by the hour, being paid $ 15 per hour. The worker will operate a machine that makes boots, with which his work produces $ 15 every 15 minutes.

Thus, the capitalist receives $ 60 each hour of work, paying only $ 15 to the worker and collecting the remaining $ 45 as gross income. After $ 25 is deducted for fixed and variable operating costs, the capitalist will have $ 20 left.

Thus, for a capital outlay of $ 40, the capitalist obtains a capital gain of $ 20. Your capital not only serves to pay for the operation, but it also increases by $ 20.

Example 2

When the worker sells his labor power, he is obliged to work for ten hours, with the tools and materials that have been provided.

However, in the first four hours of the workday, the worker produces a business value for the boss equal to the value of his work for the entire day, say $ 100.

The value created by the worker in the first four hours offsets the daily wage that the worker is paid.

However, the worker does not stop working after four hours, as he has agreed to work for ten hours. Therefore, continue creating value for the remaining six hours.

That is, during six hours of his working day, the worker creates a value for which he does not receive any compensation. In those six hours of daily time, the worker is dedicated to creating value that the boss appropriates, but for which he does not pay the worker anything.

References

1. Industrial Workers of the World (2019). Chapter III. Surplus Value. Taken from: iww.org.
2. The Hindu (2018). What is 'surplus value' in Economics. Taken from: thehindu.com.
3. Wiley Online Library (2019). Surplus Value. Taken from: onlinelibrary.wiley.
4. Marxists (2014). Surplus Value. Taken from: marxists.org.
5. Wikipedia, the free encyclopedia (2019). Surplus value. Taken from: en.wikipedia.org.