Socialist Economics: 3. Money and Prices (1974)

From the March 1974 issue of the Socialist Standard

Socialist Economics Series

The whole financial edifice of capitalism at first sight appears incomprehensible to the average person. Ignorance concerning the financial and monetary system has given rise to many unsound theories, and consequently has prevented a proper understanding of what it is, how it came into being, and the circumstances which will make the monetary system unnecessary. This is not an intellectual exercise but a vital element in exposing the nature of capitalism.

The monetary system has evolved gradually and has been in existence as a system for about 250 years in England and for a much shorter period abroad. We make a distinction between the ancient coinage of Greece, Carthage and Rome, which although used to effect the exchange of commodities was at that period incidental to the main stream of an exchange system which was based on surpluses and barter. As a general social form, money developed alongside the development of commodity production, and at the point in history when all wealth was produced in the form of commodities money became the universal medium or equivalent through which all exchange transactions were carried out.

The  first condition for the introduction of a monetary system is when social products become commodities, i.e. articles produced for sale and exchange. It is quite obvious that commodities cannot go to the market on their own. As they are owned by someone or other, he is the person who will take or send them there. Likewise, there are other owners of commodities carrying out a similar function. Each will recognize the other as a private proprietor — that is, they respect each other’s rights to dispose of the social product to their own immediate advantage. Eventually they embellish their right through a set of legal relations:

This juridical relation, which thus expresses itself in a contract, whether such contract be part of a developed legal system or not, is a relation between two wills, and is but the reflex of the real economical relation between the two. It is this economical relation that determines the subject matter in each such juridical act. (Marx, Capital Vol. I, p. 96. Kerr edn.)

The capitalists who are the owners of commodities have to appropriate the wealth of society before they can sell it. Once having done so, they create a juridical system backed up by the State machine which politically safeguards their position and consequently the whole institution of private property.

When exchange becomes a normal social practice, and the volume of transactions is being constantly repeated, inevitably one commodity emerges — either through custom or the stamp of legality — in which all the others can represent their value or express their price, which is the money-name for Value. This one commodity, which is historically acceptable, becomes the recognized universal equivalent: it becomes money — it becomes the measure of Value.

All commodities will therefore express their price through the agency of this single commodity, whatever it happens to be at any given point historically. Gold became the universal equivalent and still is for international transactions. Gold evolved as such because of the facts that it had a certain amount of social labour in it; that it was relatively durable; easily divisible; and kept its value for a long period.

The fact that currency notes without gold backing have replaced gold as the means of circulation within individual political states, does not materially alter the function of the universal equivalent. Symbolic money, introduced by state compulsion, can only circulate within the political sphere which created it. We are not concerned here with the interminable international squabbles between capitalist powers who refuse to take each other’s bad money. The fact that symbolic money is now used does not remove gold as the measure of Value, as eventually all symbolic currencies will require to be related to one another at some point, and are finally adjusted through the medium of gold.

Let us assume that 1 oz. of gold contains 100 hours of social labour, and that 40 gallons of wine also contain 100 hours. In that case 1 oz. of gold would be equal to 40 gallons of wine, or ½ oz. equal to 20 gallons of wine, or ¼ to 10 gallons — and so on. The same thing would apply to every other commodity. For example, if 4 washing machines also contained 100 hours of social labour, then 4 washing machines would be equal to 40 gallons of wine, or 1 washing machine to 10 gallons of wine or ¼ oz. of gold. The change from one universal equivalent to another does not, nor cannot, alter the exchange value, or the proportion in which one commodity exchanges with another. Gold, as the money commodity, or currency, as the recognized legal form, are really external factors. Different products of labour are being equated with one another, and the function of money is to facilitate this equation for practical commercial purposes. The law of Value, like the law of gravity, is not subject to amendment by Acts of Parliament. Currency is not Value.

The amount of currency notes needed to carry out exchange transactions depends on the number of transactions, the speed with which they are conducted, and the volume of commodities to be exchanged. If for example £5 million (currency) was required to circulate £50 million worth of commodities, and the Government decided to print £10 million, then the purchasing power of the £ would have fallen and it would take £2 to purchase what would previously be purchased for £1: prices would rise accordingly. The value of the commodities has not changed, but merely that their standard of measurement has altered. You do not alter temperature by changing the numbers on a thermometer. Prices will rise because the measure of price has fallen. Prices will rise higher, and in direct ratio to the depreciation of the symbolic standard of measure. This is the main factor in rising prices. The exchange of commodities is not based on legal promises to pay or arbitrary standards which alter according to political expediency. Therefore they will express their value, as they have always done, on the amount of socially-necessary labour contained within them.

Supply and demand do not determine prices, although they influence them. A shortage will create higher prices, a surplus low prices. But invariably, throughout most fields of production and distribution, through repetition the supply of commodities becomes equal to the demand for them and the two therefore cancel each other out. These are accidental factors and do not determine value, any more than a train driver can determine the route between London and Glasgow.

Other factors which influence price are monopoly and subsidy. Monopoly action by certain groups of capitalists with-holding supplies of a given commodity can cause prices to rise. The Arab oil sheikhs demonstrated this recently. Monopoly does not add to the surplus wealth but merely redistributes it. Capitalism cannot run on the basis of permanent monopoly anymore than it can run on the basis of permanent subsidy. Subsidy is the action which is carried on by certain governments to keep prices below the current market level, from time to time. For many years the prices of food and housing were kept artificially low deliberately in order to keep wages down.

The introduction of an excess of currency notes over and above those required to circulate will undoubtedly cause dislocation not only in the marketing process but also in the productive process. This we are now witnessing. You cannot print Value. If governments could only follow the example of King Midas how happy they would be. Like the old Canadian bum, they have the button of inflation if only someone would sew a shirt on to it.

Jim D'Arcy

Socialist Economics: 2. Value (1974)

From the February 1974 issue of the Socialist Standard

Socialist Economics Series

Articles are exchanged because they are different. This means that they possess a different kind of useful labour. It is the quality of the labour which makes them different. The labour of the bricklayer is different to that of the fitter, as is the labour of the pattern-maker to the coal miner’s. Consequently, the products are different. Identical goods or services are not exchanged for each other as there would be no useful purpose in doing this. Coal is not exchanged for coal. In a world of commodity production, this qualitative difference between definite types of useful labour develops into a complex system. A social division of labour. These useful forms of labour are carried on independently by individual producers working on their own account.

Human labour, in addition to producing Use-Values also produces value — It has a double function. The commodity is the depository of Value. Whilst everyone can see, eat or feel the Use-Value of a commodity, i.e. its material side, it seems impossible to grasp its Value. It is the very opposite of its Use -Value. Use -Value is something which can be experienced but Value is an abstract quality. However, we know that all commodities have one thing in common; they are products of human labour, and it is this which gives them their Value, and consequently their social reality. It is only during the social process of exchange that Value will declare its origin, that is, when commodities containing different forms of human labour confront each other on the market. This is nothing other than the social relation of commodity to commodity.

It follows then that value is a social relation not between persons but between their products. It is a relation between objects which contain an identical social substance, human labour. The multifarious sub-divisions of labour are directed entirely to the exchange of commodities, and there is no direct relation of social production to social producer.

The capitalist system does not produce for consumption. Its function is to produce surplus value, out of which the capitalists — industrialists, banks, landlords — take their profits. The sole agency through which Value comes into existence is the international working class (including Russian and Chinese who work within State capitalism). They allow the capitalist not only to take the fruit of this labour, but also to dictate the conditions under which they produce, no matter how soul-destroying and tedious. “Allow” is the operative word, because the capitalist system could not survive against the wishes of workers collectively opposed to it.

The worker’s access to his own product is through the wage packet. He obtains his means of subsistence in the form of commodities — articles produced for sale or exchange with a view to profit. This peculiar way of getting his livelihood, where there is no direct relation between production and consumption, leads to a situation where workers tend to avoid thinking about the overall purpose of production, and lend their thinking and activity to engaging in the wages struggle, which from their point of view is at least simple and uncomplicated. The capitalist is the enemy to be attacked but, as we know only too well, only on the wages front. It is the Socialist who tries to show the real significance of the class struggle by refusing to be dominated by the narrow Trade-Union issue, and demands that the capitalist be stripped of the means of production and that these become social property.

Because capitalism produces wealth in the form of commodities, the relations between the various producers are not direct. That is to say that there is no conscious co-ordination or specific purpose between the various branches of production and distribution. Everything appears to happen spontaneously or accidentally; everything has to be done for an anonymous market. Nobody has any direct control over what will be produced, when, or in what quantity. In earlier forms of society there was social co-ordination and planning of production, even though this was on a simple scale due to the undeveloped nature of the productive forces. The food supply was obtained through hunting, fishing, fruit-gathering, etc. Some members of the community made cloth, others pottery, weapons, etc. This simple division of labour produced simple methods of distribution, and both were integrated with the needs of the community and under its direct control.

Today we have a fantastic situation where the only laws governing production are the laws of exchange. Not having any direct interest in production as such, but only in the production of Value and the exchange of their own commodity — labour-power — the working class are unable to comprehend the social powers of production. The real world for them is the world of exchange. They wish to live in a situation where the hazards of capitalism can be tolerated, and where they can sell their lives in instalments of their labour-power, which will be exchanged ultimately with instalments of fellow-workers’ labour- power. However, capitalism will not let the worker live quietly or stabilize his slavery. It steps up the pressure, and eventually forces him into a situation where he has to learn something new in order to escape from the pressure-cooker.

The capitalist class, including their governments, do not control capitalism, do not control production, nor can they anticipate demand. Each capitalist carries on independently. His knowledge of the market is restricted because he cannot know how much will be produced and sold from time to time. Competition between capitalists creates conflicting interests, and these are a barrier to balanced social production. Most capitalists will back their experience, or engage in market research, in the hope of foreseeing demand. However, there is always some unforeseen factor. For example, few capitalists in Europe could foresee the action by Arab capitalists which was taken strictly in line with economic interests, and in opposition to the interests of other world capitalists. This was inevitable: in a capitalist society you cannot expect the Arabs to behave in a non-capitalist way. Our Alice-in-Wonderland economists are now desperately trying to explain away the advice they gave to their masters on the imminent boom which turned out to be a slump. The whole picture of capitalist production is one of social anarchy. This anarchy is the direct result of social production being appropriated by the capitalist class, resulting in the antagonism between producers and possessors — the class struggle.

We have the absurd situation produced by the relation of Value where the products, in effect, govern the producer. The Socialist proposes that the social means of production, including distribution, should be directly controlled by a society whose overriding concern is to provide all men and women with the best existence society is capable of, without the Value relation, or any other economic relation based on Value. The physical production of wealth is well within the technical capability of a world-wide community with the will to do it. We are forced to stand by when ignorant experts hold the field lecturing on the economics of scarcity and belt-tightening. Despite the scare stories about falling world resources, there is sufficient wealth-potential — used in a responsible way, not squandered or vandalized as is the case today — to maintain a Socialist society for a very long time. As for the figure of 3.5 annual growth rate, Socialist society would disdain such a small increase and take the fetters off the productive forces. Capitalism has nearly succeeded in creating a race without real ambition.

The social relation of Value represents a condition where the exchange of the product represents the exchange of the various types of labour embodied in the product, and consequently provides the only social link between the producers. It is a relationship of things rather than persons. The Value relation can only exist in a society concerned with exchange, where things are more important than people. If the social powers of production are brought under the democratic control of society, a new and progressive era will have been founded; exchange will become obsolete, and the higher social relations based on planned production for need will have been established.

Jim D'Arcy

Socialist Economics: 1. Commodities (1974)

From the January 1974 issue of the Socialist Standard

Socialist Economics Series

It is impossible to understand the way in which the Capitalist system works without some knowledge of basic Marxian economics. Such knowledge is invaluable to the Socialist because he can use it to expose the myth that the capitalist is the lynch-pin of society and without him, civilization would perish.

The Marxist theory of value is based upon the analysis of the commodity. Marx describes the commodity as being the “cell form” of capitalist society, and that wealth within capitalism presents itself as a vast accumulation of commodities.

First and foremost, a commodity is a product of human labour under definite social conditions of production which can only apply to capitalist society. It is an article produced for sale or exchange with a view to profit. It contains two diametrical opposites—Use-Value and Exchange-Value.

Use-Value is the utility of an article and is something concrete. Food can be eaten. Homes can be lived in. Clothes can be worn. This is self-apparent. But as we Socialists are well aware, the production of use-values is not the prime function of capitalist society. That function is the production of Exchange-Value.

Exchange-Value or price is the proportion in which commodities exchange with each other. A thing possesses exchange-value only to the person who has no use for it and loses its exchange value when its use-value asserts itself or is eventually lost in consumption.

Commodity production is peculiar to capitalist society. When we talk about commodity production we mean a condition where the dominant means and almost the entire means of social production are devoted to the production of articles for sale and exchange. Commodities have been produced in past societies before capitalism, but their production was confined to the handicraftsmen or to incidental surpluses. Their production was never a mass social process as it is today. It is only in capitalist society that commodity production becomes the prevailing mode of production.

Use-value has nothing to do with whether or not an object or service is useful to humanity. The whole economy of capitalism has a multitude of products and services which are incontestably useless, and indeed harmful. Nuclear weapons; military bases; equipment for armies; banking, insurance and the whole apparatus of wholesale and retail. The institutions and services, however, are useful to capitalism and use-value in this context is related to the needs of capitalism and whatever these needs may be from time to time.

The most practical way to find out whether an article or service is useful or not is when it is offered for sale. If no-one wants it, then it is socially useless whatever its virtues in other respects. Production of that particular commodity or service would then cease as its reproduction would be unnecessary. To put it another way, the production of any commodity or group of commodities which cannot be marketed or sold is useless by capitalist standards. The fact that a social need may exist for unwanted commodities has nothing to do with the case. There is no morality in capitalist economics.

Some things which are bought and sold are not commodities. Bearing in mind that (a) a commodity must contain a certain amount of human labour and (b) that it must be capable of being reproduced we find that there are a number of instances where this does not apply.

Land (excluding buildings) for example contains no value; there is no labour involved in its production. It cannot be reproduced. Nevertheless, land is bought and sold; it has a price, and that price is determined by competition between buyers. A woman’s virtue is not a commodity but we know that virtue may be sold by prostitution. Likewise with a man’s character. You can buy a man’s character by bribing him. What happens in effect is that these non-commodities assume the commodity form. They take on an abstract exchange-value, and successfully masquerade as the real thing. Likewise with works of art.

The value and consequently the price of a commodity is determined by the amount of social labour spent on its production. Social labour includes the materials used in the productive process and is measured in time.

There is one important qualification and that is that the labour must be socially necessary. If this were not the case, the more inefficient and time-wasting processes would produce the most value, which is nonsense. Socially necessary labour means the average time that is spent in any field of production or distribution in the manufacture of articles or services. For example, if crude oil was shipped from Europe to the Middle East, the cost of society’s time, including the element of wear and tear on the ship etc., could not be added to the product because this would have been unnecessary labour (as crude oil is found in abundance in the Middle East). Again, if a group of capitalists decided to erect a factory on the Island of Tristan de Cunha or some other remote spot, say for the manufacture of textiles, the cost of the textiles would not have a greater value on account of the cost of shipment, transport and other charges, for the obvious reason that the areas for producing textiles are mainly concentrated in industrial areas with all the attendant services of railways, roads etc. Again (although the example may be open to question due to the capitalist energy crisis), if a firm decided to build Hansom cabs to be drawn by horses to replace taxi-cabs, the social time spent on these would be quite valueless, as this commodity (transport) by horse-drawn carriage is obsolete and is not used by society outside of its novelty value which is minute.

Socially necessary labour must take into consideration the things which society now requires, and the average methods through which they can be obtained. This average working raises another question, and that is whether by using the latest machinery the value of the product is less than that of similar products produced by relatively old machinery, because the time spent on the former is naturally less. The answer is that we have to take an average throughout the whole field of this production in particular. In the coal-mining industry throughout the world, methods of extracting coal vary from working narrow seams to exploiting huge faces by coal-cutting machinery. The hand-cut coal is not more valuable, and in any case the entire production of coal cannot be carried out by hand. Neither can it be entirely carried out by machinery; therefore the average time is proportioned between the two methods. Again, if we take ten firms with varying degrees of efficiency say from 1-10, the average would be 5 and this would represent the social necessary labour time. Socially necessary labour is the substance of value, or conversely value has for its substance embodied or congealed labour.

We shall have a look at another aspect of Marxian economics in a further article.

Jim D'Arcy

Obituary: Georges Valentino (1996)

Obituary from the May 1996 issue of the Socialist Standard

We regret to report the death in Paris of Georges Valentino, one of our long-time supporters in France. He was born in Guadeloupe in the French West Indies which his father for a time represented in the French National Assembly (for the reformist SFlO and then for the Gaullists). He used to recount how he and others in his unit, sent as conscripts to fight in Algeria, used to fire on their officers’ command posts rather than at "the enemy", with whom they recognised they had no quarrel (a practice later also employed by some GIs in Vietnam).

Georges came across us in the 1960s and immediately realised that this was the political group he had been looking for. He had previously been a member of the French Communist Party and then of the short-lived Parti Socialiste Autonome. He was a regular contributor to Socialisme Mondial, the French-language journal brought out by comrades in Canada and France between 1973 and 1988, and contributed the occasional article to the Socialist Standard. He also helped with the translation of our declaration of principles into correct political French.

He earned a precarious living selling newspapers and working in bars and cafes. It was no doubt, unfortunately, this precarious existence which led to his premature death before the age of 60.

Adam Buick

Middle-Class “Socialism.” (1907)

Editorial from the October 1907 issue of the Socialist Standard

In a communication to the Magazine of Commerce, Mr. H. G. Wells, whom the Clarion hails as a "prominent Socialist," gives his views as to whether a capable business man stands to gain or lose by the coming of a Socialist Government.

"I submit," says Mr. H. G. Wells, "that, on the whole, he stands to gain. Let me put down the essential points in his outlook as I conceive them.
" Under a Socialist legislation:—
" He will be restricted from methods of production and sale that are socially mischievous.
" He will pay higher wages.
" He will pay a higher proportion of his rate-rent out-goings to the State and municipality and less to the landlord.
" These items in his outlook the business man may contemplate with doubt, but, on the other hand,
" He will get better educated, better fed, and better trained workers.
" He will get a regular, safe, cheap supply of power and material. He will get cheaper and more efficient internal and external transit.
" He will be under an organised scientific State, which will naturally pursue a vigorous scientific policy in support of the national trade.
" He will be less of an adventurer and more of a citizen."

As with other so-called Socialists of the middle class, Mr. Wells makes it plain that his conception of Socialism is a middle-class heaven wherein, although higher wages may be paid, yet only so because it is the price of a more efficient and more profitable labour-power. Wherein, in fact, the capitalist will get cheap labour, cheap material, cheap power and cheap transit and where he will sell at an advantage because "the State will pursue a vigorous scientific policy in support of the national trade."

We commend the utterances of Mr. Wells to the careful attention of our readers for it illustrates yet again that the "Socialism" professed by middle-class would-be leaders of the workers is directly opposed to the interests of the working class and is as much the enemy as Liberalism or Toryism. It is, indeed, but capitalism with a thin disguise of bunkum. It is a state of society specially designed to provide greater profit and power to the decaying middle class, where the Trust shall cease from troubling and the Receiver be at rest, and where also the wage-slaves shall be more efficient and profitable to the end that the "intellect" and "ability" of the middle class, rescued from bankruptcy by the "Labour" movement, may scoop in all the profit.

Inequality in Russia (1943)

From the January 1943 issue of the Socialist Standard

Sir Rowland Evans, a Liberal politician, in a letter to the Times, stated that 

Whereas statistics indicate that in Britain before the war the upper 10 per cent, of the population received 45 per cent, of the national income, an authoritative analysis of statistics published in the Soviet Press in 1939 showed that the upper 11 per cent, or 12 per cent, of the Soviet population then received approximately 50 per cent, of the national income.—(Times, December 15, 1942.)

One correspondent challenged the figures on the ground that the rural population ought to be excluded as it is impossible in rural areas to find members of an upper category. He claimed therefore that what the figures would really show would be that in the towns

every third worker or employee or member of their families . . . belongs to an upper category, similar to the upper 10 per cent, of the population in Great Britain.—(Times, December 16, 1942.)

The figures were then challenged by Andrew Rothstein, Chief Correspondent of the Russian Official Tass News Agency (Times, December 21, 1942). His principal ground of objection was that the estimate came from "an article by a counter-revolutionary terrorist, anti-Soviet propagandist and agent of Hitler." This is relevant, but it does not settle the real question, which is "was the estimate accurate?" Rothstein had the opportunity of answering Sir Rowland Evans's demand for his own figures. Rothstein is in a position to give the Russian Government’s own figures about inequality of income, but though he gave various other pieces of information he did not answer the question. Instead, he dwelt on the point that “in the Soviet Union the share of the national income which comes to the individual depends exclusively (unless he is a criminal) on the work which he does."

He did not question that artists, scientists, engineers, factory managers and State officials, etc., receive larger incomes than the mass of the population, but maintained that this group is certainly not large enough to account for 50 per cent, of the national income or anything like it.

One significant feature of Rothstein's letter was that it nowhere even mentioned the fact that millions of Russian citizens draw income from their investment in Government bonds. Rothstein may, of course, argue that income derived from interest on such investments is indirectly the result of the work orginally performed, but why did he not mention it? At January 1, 1934. the amount of Government loans outstanding was about 14,000 million roubles (about £560 million at 25 roubles to the £—Whitaker's Almanack, 1942, page 944). This figure will have been greatly increased since 1934 as thousands of millions of roubles are raised each year. In April, 1942, a new War Loan of 10,000 million roubles (£400 million) was raised (Soviet War News, April 16. 1942, and Evening Standard, April 15, 1942). The interest is 2 per cent, but in addition each holder of a 100-rouble certificate has a chance of winning a prize of 50,000 roubles (£2,000), or smaller amounts.

It was also announced (People, December 7, 1941) that the Russian Government were to run a lottery to help the war effort, tickets being issued to the amount of £40 million.

With regard to inequality of income, it was stated in the Sunday Dispatch (August 17, 1941) that the “average minimum wage is 250 roubles monthly, though specialists may receive an average as high as 2,000 roubles a month." (This article was shown to the Soviet Ambassador before publication.)

Other ways of obtaining large sums of money are indicated by the announcement that Ilya Ehrenburg, the Russian journalist, received the Stalin prize of 100,000 roubles for his book, “ The Fall of France" (Evening Standard, May 19, 1912).

With regard to the Russian Income Tax, Mr. J. C. Jagger, Honorary Secretary of the British Association of Officers of Taxes, who visited Russia in 1936, made the following statement:—

Earnings up to 250 roubles per month are exempt but sums in excess of that figure are charged at progressively increasing rates, commencing at 80 kopecs per 100 roubles (100 kopecs—1 rouble) to a maximum of 260 kopecs per 100 roubles at 800 roubles a month. Tax is not charged on earnings in excess of 800 roubles and, in these days of output or sales in excess of the “plan" many of the citizens escape taxation at a point for which we have no legal parallel."—Taxes, October, 1936.)

In conclusion here ore two statements which throw further light on inequality in Russia. One is from the American journalist. Negley Farson, cabling from Moscow in Feb., 1942 (Daily Mail, February 28). He remarked on the “ beggars, the halt, the blind, mewling their woes and thanks " in gratitude for gifts obtained from a queue of people waiting to go into the Cathedral.

The second is from the Daily Worker (September 25, 1942) from the pen of John Gibbons, writing from Moscow. He explains that in addition to the ordinary vegetable ration at fixed pre-war prices, workers in factories and offices buy extra vegetables from their place of work. There are, however. other markets of tin rationed goods “ for those who have money and inclination "—

For those who have money and inclination, collective farm markets, of which there are dozens in Moscow, contain a rich and varied assortment of un-rationed farm products. Here prices are higher, varying according to the season. Potatoes, for instance, now cost less than half what they did six weeks ago.

It certainly seems that Mr. Rothstein might usefully have added many things to his statement made in answer to Sir Rowland Evans.

Edgar Hardcastle