For the first issue of Monthly Review in May 1949 Einstein contributed an essay entitled Why Socialism?. He began by explaining that humans are naturally social animals but that the structure of present-day society prevents this from being properly expressed, leading to the ‘crippling of the social consciousness of individuals’, and that ‘the economic anarchy of capitalist society as it exists today is, in my opinion, the source of the evil’.
He explained the workers’ situation under capitalism:
‘For the sake of simplicity, in the discussion that follows I shall call “workers” all those who do not share in the ownership of the means of production – although this does not quite correspond to the customary use of the term. The owner of the means of production is in a position to purchase the labor power of the worker. By using the means of production, the worker produces new goods which become the property of the capitalist. The essential point about this process is the relation between what the worker produces and what he is paid, both measured in terms of real value. Insofar as the labor contract is “free,” what the worker receives is determined not by the real value of the goods he produces, but by his minimum needs and by the capitalists’ requirements for labor power in relation to the number of workers competing for jobs. It is important to understand that even in theory the payment of the worker is not determined by the value of his product.’
The ideological apologists of capitalism are still trying to refute this as a recent contribution to Mises Wire, entitled ‘Albert Einstein and the Folly of Marxist Sympathies’, shows. The author, Kgatlhiso Darius Leshaba, challenged Einstein’s endorsement above of Marx’s theory of worker exploitation:
‘The first problem we run into is the concept of value. It has been firmly established that economic value isn’t intrinsic, that “The measure of value is entirely subjective in nature.” Value is not transferred somehow from labor to product. In fact, the direction of the imputation of value is exactly the other way around. The economic value of labor is determined by the value of the final product it aids in producing’ (tinyurl.com/bdh7d6je).
Leshaba was quoting Carl Menger (1840-1921), the founder of the so-called Austrian School of economics, who came up with a theory aimed at refuting Marx or, in the words of the Mises Institute, ‘corrected theoretical errors of the old classical school. These errors concerned value theory, and they had sown enough confusion to make the dangerous ideology of Marxism seem more plausible than it really was’ (tinyurl.com/3r7n4wy2).
To say that economic value is ‘entirely subjective’ is to confuse use-value and exchange-value and assumes that production is carried on simply for the use of consumers. Obviously a commodity, as an item of wealth produced to be sold, has to be useful to somebody, otherwise it wouldn’t sell. The demand for it could be said to be ‘subjective’ in the sense that it depends on the buyers’ preferences but this merely explains the pattern of (paying) demand for something. It does not explain the supply.
No firm is going to produce a commodity unless it calculates that the income from selling it will at least (in practice more than) cover the prices of what it had to buy to produce it. So cost of production comes into it and that does not depend on the preferences of consumers. The claim that production costs (including wages) are subjective because their value is derived from being used to produce some consumer good whose value is said to be subjective is just assuming what has to be proved. It doesn’t explain the division of what national income statisticians call ‘added value’ into wages and profits and is not taught these days even in bourgeois economics.
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