Why Marx’s critique of capitalism still matters (2026)

From the September 2026 issue of the Socialist Standard

Marx’s Capital is subtitled A critique of Political Economy. ‘Political Economy’ was an attempt to explain how capitalism works and how it might develop over time, Two of its main representatives were Adam Smith and David Ricardo and much of Capital is shaped by and addresses the works of those two thinkers. They shared a fundamental idea that we know as the Labour Theory of Value (LTV), but it had a major flaw: the inability to explain the source of capitalist profit. This flaw was only solved in Marx’s Capital. Below, we discuss issues around the theory.

Part I: The Ricardo problem

To understand Marx’s contribution, you first need to understand the problem he inherited from classical political economy.

The classical labour theory of value

Adam Smith and David Ricardo both worked with versions of the labour theory of value. The basic idea: the value of a commodity is determined by the amount of labour required to produce it. The greater the labour-time required, the greater the value of the commodity.

This made intuitive sense and seemed to explain a lot about how markets worked. But it had a fatal flaw that Ricardo acknowledged but couldn’t resolve. By the way, both of them treated ‘labour’ as the only commodity that the worker brings to market.

What Ricardo understood

Labour Theory of Value: Commodities exchange based on the labour time required for their production; labour is the source of value.

Class conflict: He recognised that capitalists, landlords, and workers have opposing interests; rising wages reduce profits and vice versa.

Where Ricardo stopped (and Marx went further)

1. Naturalisation of capitalism

Ricardo: ‘This is how economies function. Labour creates value, always has, always will.’

Marx: ‘Value is specific to capitalism. In other systems like feudalism, labour does not take the form of value.’

Value can be defined as the socially necessary labour-time spent reproducing commodities within the capitalist mode of production.

2. Inability to explain profit’s source

Ricardo’s dilemma: If labour creates all value and workers are paid for for their labour, where does profit arise? He couldn’t resolve this contradiction.

Marx’s solution: Workers are not paid for their labour; they are paid for their labour-power. Labour-power possesses a value, say 10,, reflecting the cost of reproducing the worker (food, shelter, etc.), but normally generates more value, say 12, when consumed. It is the only commodity which can do this, This extra value is the source of profit.

Historical context: Franklin, Smith, and Aristotle

Benjamin Franklin contributed to this discourse by asserting that the value of a commodity derives from the labour hours needed for its production from start to finish. Franklin never developed it into a theory. He was writing about legitimising paper currency.

Adam Smith maintained a contradictory attitude to value, shifting between LTV and a cumulative theory whereby value was determined by wages + profit + rent. He noted that commodities exchanged at equal ratios (one beaver = two deer) but couldn’t explain why this was so.

Aristotle was able to observe the LTV in action – he saw that commodities exchanged at stable ratios (5 beds = one house) but couldn’t explain why this should be so. Marx paid him a compliment writing: ‘Aristotle’s genius is shown by [the fact] that he discovered, in the expression of the value of commodities, a relation of equality’ (Capital volume 1 chapter 1) but the inequality inherent in a slave society blinded him to the source of that equality.

The profit paradox:

Here’s Ricardo’s problem: if, as he argued, commodities exchange at their value (determined by labour-time), and if labour itself is a commodity that exchanges at its value, then ‘where does profit come from?’

Let’s walk through it:

1. A capitalist buys raw materials at their value (say, $50 worth of cotton yarn).

2. The capitalist buys labour from the worker at its value (say, $50 for a day’s work).

3. The worker transforms the yarn into cloth.

4. The capitalist sells the cloth at its value (the combined labour-time of producing the yarn + weaving it into cloth).

Total cost: $100 (materials + labour)

Total revenue: $100 (value of the cloth)

Profit: $0

But capitalists do make profit. So either:

1. Capitalists are systematically cheating (buying below value, selling above value), or

2. There’s something wrong with the theory.

Ricardo couldn’t solve this. He acknowledged the problem but left it as an unresolved contradiction in his system. He died not being able to resolve it. He had his hand on the doorknob, but didn’t turn it and walk through the door. This wasn’t just an academic puzzle – it was the central question of political economy. Without solving it, you couldn’t explain how capitalism actually worked.

The moralistic detour

Some socialist thinkers – particularly Pierre-Joseph Proudhon – seized on this contradiction and concluded: ‘Capitalism is theft’. Workers are being cheated. The solution is to create fair systems of exchange where workers receive the full value of their labour.

Proudhon’s famous declaration – ‘Property is theft!’ – captured this moral outrage. His solution was mutualism: worker cooperatives, mutual credit banks, and systems of direct exchange that would eliminate the middleman capitalist.

But this was a dead end. Why? Because it misdiagnosed the problem. It assumed exploitation happened because of cheating – bad actors violating the principle of equal exchange. Marx would show that exploitation happens within equal exchange, as a structural feature of the system itself. This is the difference between scientific socialism and utopian reformism. Capitalists aren’t villains – they’re playing by the rules. The problem is the rules themselves. But on we go…

Part II: Marx’s breakthrough – Labour vs. Labour-Power

Marx’s genius was in recognising that Ricardo and Proudhon were asking the wrong question. The problem wasn’t that capitalists were cheating. The problem was that labour itself isn’t what workers sell.

The distinction

Marx distinguished between two concepts that everyone before him had conflated:

1. Labour-power: The capacity to work. This is what the worker sells to the capitalist – their ability to perform labour for a certain period of time.

2. Labour: The actual activity of working, which produces value when labour-power is consumed in the production process.

This distinction is subtle but revolutionary. Here’s why it matters:

Labour-power as a commodity

Like any commodity, labour-power has a value – determined by the labour-time required to reproduce it. But what does it mean to ‘reproduce’ labour-power?

It means: ‘the cost of reproducing the worker’.

To show up to work tomorrow, the worker needs: food, shelter, clothing, rest, healthcare, education or training.

The ‘value of labour-power’ is the socially necessary labour-time embodied in these necessities. In other words, it’s roughly the cost of keeping the worker alive, healthy and able to work. There is an additional component too that covers the cost of raising the next generation of workers

Let’s say all this costs $100 per day. That’s what the capitalist pays in wages.

Labour as value-creating activity

But here’s the key: when the capitalist consumes labour-power – when the workers actually work – they produce more value than the cost of their labour-power (Marx lays this out explicitly in Chapter 6 of Capital Volume I).

Let’s say the worker works an 8-hour day and produces commodities worth $200.

The capitalist pays: $100 (the value of labour-power).

The worker produces: $200 (the value created by labour).

The difference: $100 (surplus value, appropriated by the capitalist. It will then be split up into profit, interest and rent, but that is immaterial to the present discussion).

Why this solves the Ricardo problem

Notice what just happened: Exchange occurred at value. The capitalist paid the worker exactly what their labour-power is worth. No cheating. No violation of market principles.

And yet, the capitalist extracted surplus value. This doesn’t come from cheating – it comes from the unique nature of labour-power as a commodity.

Labour-power is the only commodity whose consumption produces more value than it costs.

This is the secret of capitalist accumulation. And it’s why Marx’s critique is fundamentally different from the moralistic critiques that came before. This is why socialists assert that class war originates in the employment process – the less a worker is paid, the more a capitalist accumulates in profit. It’s not about being greedy or evil, or being good or generous. It’s simply necessary to compete in the effort not to go out of business. The capitalist who refuses to extract maximum surplus value doesn’t stay a capitalist for long – they get driven out by competitors who do. The system selects for exploitation.

Part III: Why a moralistic critique is dangerous

Marx didn’t just disagree with Proudhon’s analysis – he considered it dangerous to the working-class movement. Why?

1. It misdiagnoses the problem

If you believe exploitation happens because capitalists are ‘cheating,’ your solution becomes: ‘Make capitalism fairer.’

This leads to reformist dead-ends:

1. Worker cooperatives that still must compete in capitalist markets

2. Ethical consumption campaigns

3. Appeals to capitalist conscience

4. Labour laws that tinker at the margins

These strategies don’t challenge the fundamental structure. Even the nicest, most ethical capitalist must extract surplus value to survive in competition. If they don’t, they go bankrupt.

Bad diagnosis = bad cure.

2. It lets capitalists off the hook

A moralistic critique says: ‘Capitalists are bad people doing bad things.’ This can lead to people organising to use violence and fantasising about using guillotines to get this or that capitalist, which will not solve any problems. The problem isn’t the capitalists themselves, it’s the system’s rules that require the capitalist to behave in a certain way.

A moralistic critique is easy to deflect:

1. ‘I pay above minimum wage!’

2. ‘I offer great benefits!’

3. ‘If you don’t like the wage, don’t take the job!’

Marx’s structural critique is much harder to escape: ‘Even if you’re the most generous capitalist in the world, you are still extracting surplus value. If you didn’t, you wouldn’t be a capitalist. The system requires exploitation to function, regardless of your personal morality.’

3. It divides the working class

If exploitation is about bad bosses, workers start thinking:

1. ‘My boss is actually pretty nice. Maybe I’m not exploited.’

2. ‘We just need to replace the greedy CEOs with ethical ones.’

This fractures class consciousness. Workers waste energy trying to find good employers instead of recognising that all wage labour involves surplus extraction.

3. It obscures the source of power

A moralistic critique makes exploitation seem psychological – a matter of individual greed.

Marx showed that it’s structural. Even a worker-owned co-op, operating in a capitalist market, must increase productivity and accumulate capital to survive. The system itself enforces exploitation.

Part IV: Conclusion: Why this still matters

Marx’s labour/labour-power distinction isn’t just an abstract theoretical point. It has profound implications for how we understand the economy and our place in it.

It explains profit without cheating

You don’t need to believe in conspiracy theories about greedy capitalists. The system works exactly as advertised – and still produces exploitation.

It reveals the structural nature of exploitation

This isn’t about bad individuals. It’s about a mode of production that requires the extraction of surplus value to function.

It clarifies strategy

If exploitation is structural, you can’t reform it away. You can’t create ‘ethical capitalism’ or ‘fair trade’ your way out of it. You need to change the fundamental relations of production. In other words, capitalism can’t be made nice – maybe nicer at the margins, but never nice. The extraction is baked into the structure.

It cuts through ideological mystification

When someone tells you ‘the market is fair’ or ‘you’re paid what you’re worth,’ you can ask: ‘Then where does profit come from?’

The labour/labour-power distinction gives you the tools to see through the illusion of equal exchange and recognise the hidden extraction at the heart of the system.

Dan Mullens

Cooking the Books: No Marx without Adam Smith? (2026)

The Cooking the Books Column from the February 2026 issue of the Socialist Standard

Next month is the 250th anniversary of the publication of Adam Smith’s The Wealth of Nations. In the run-up to this, the Economist (18 December) carried an article by its ‘senior economics writer’, Callum Williams, in which he suggested that Smith had been ‘misinterpreted and his influence overstated’.

His case was that Smith wasn’t the originator of the ideas he expressed, that he copied from others and was a bad writer, and that he also made mistakes:

‘In the “Wealth of Nations”, he argued for the “labour theory of value” (the idea that the amount of work that goes into a product determines its price, rather than how useful that product is). This theory distracted economists for decades and laid the groundwork for Marxism. Exploitation, in Marx’s view, arose from the difference between how much workers had laboured to create a good and what they were paid for producing it. Without Smith, there could have been no Marx’.

The last sentence is ridiculous. There were others before Smith who put forward the view that the exchange-value of a product of labour depended on the amount of labour required to produce it. In a footnote early on in the opening chapter of Capital, Marx’s quotes Benjamin Franklin as having pointed out in 1729 that:

‘Trade in general being nothing else but the exchange of labour for labour, the value of all things is … justly measured by labour’.

Prior to Capital, in A Contribution to the Critique of Political Economy (1859), Marx credited Franklin as the person ‘who for the first time deliberately and clearly … reduces exchange-value to labour-time.’

In a podcast on the same subject on 1 January, Williams attempted to refute the labour theory of value by saying that, on the contrary, ‘what determines the price of a good is … how much demand there is for that good and how much of that good is supplied by the market’. This differs from what he had written in his article that a product’s price is determined by ‘how useful that product is’. That argument is easy to refute —there are a lot of things that are more useful than gold or diamonds yet gold and diamonds have a higher price; which, clearly, must have something to do with the fact that it is more difficult (takes more work and time) to produce gold and diamonds than it does to produce the other, more useful products.

Supply and demand determine the short-term market price but, in the longer term, supply will only continue if the suppliers — profit-seeking capitalist firms — cover their costs and make a profit. In bringing about the longer-term price the play of market forces will take into account the labour-time required to produce the product from start to finish.

Not that Marx did argue that under capitalism products exchanged at their labour-time value. He was well aware that the pursuit of profits resulted in this happening only accidentally but that the prices at which products sold could only be explained on the basis of a labour theory of value.

The reason why economists came to reject any labour theory of value (Smith’s as well as Marx’s) was that it led to the conclusion Marx reached who, said Williams, based ‘his entire theory of exploitation on the labour theory of value’. It was, he said, ‘precisely because Smith was so influential, his wrong-headedness about the labour theory of value was a big problem.’

This problem was solved, says Williams, when economic theory ‘gets wrestled back through the correct understanding of value by the marginalists at the end of the 19th century’. How convenient for the exploiters of labour, but it turned academic economics from a science into apologetics for capitalism.

Marxism, a Virile “Ghost” - Part 1 (1933)

From the August 1933 issue of the Socialist Standard

According to an article in John O' London's Weekly, dated May 13th, 1933, "Marxism is Dead,” and though students of Marxian thought may feel ill disposed to mourn the loss of one departed spirit alone, we find the theories of Adam Smith coupled with those of Marx.

In passing, we should like to take the opportunity of mentioning that the number of times Marxism has been "appointed dead” during the last half century must surely surpass the number of times the world has been “coming to an end" since the going of Jesus Christ.

However, the death of Marxism having been “duly certified,” the writer of the article in question proceeds to the post mortem examination. But what does the analysis reveal? Lest Marxians should await the result of the analysis in fear and trembling, we hasten to disclose the findings of our journalistic analyst. Let us reproduce his own words. After suggesting that the two most important books ever written on political economy are “The Wealth of Nations,” by Adam Smith, and ”Das Kapital,” by Karl Marx, our critic says: — 

“The doctrines of Adam Smith and Karl Marx alike are, of course, discredited amongst modem students of economics for the simple reason that those doctrines left out the human factor."

It further appears that both Marx and Smith helped to bring their own works to disaster because of "their essentially materialistic outlook on the economic activities of mankind.”

What a revelation, indeed! We seem to remember hearing all this before, many a time. Anyhow, aside from the positively untrue and dogmatic assertion that Marx’s theories are discredited amongst students of economics (unless it is meant that they are discredited by those who oppose Marx’s theories, in which case we sympathetically agree). What, may we ask, is meant by the "human factor.” Presumably, since no details are given by our critic, we can but conclude that we have once again encountered that hoary objection to Marxism that it leaves no part to the influence of human behaviour in moulding the history of human society.

Now, were it not that this notion is so often stated in open or disguised form, even by pseudo-Socialists, we would feel impelled to act similarly to the Pharisee of old and ”pass by on the other side.” But, unlike the Pharisee, instead of thanking ”God” for not being "as other men,” we should confer the honour upon Marx himself. For even a casual study of Marx’s works is sufficient to dispel the illusion stated above. But perhaps a casual acquaintance with his writings is too much to expect from some of his critics.

Rather does it seem that the one indispensable condition for a criticism of Marxism is not to have read Marx at all. Or to have read him and ignore what he says. Significantly enough, in the same article from which we have quoted, the writer says quite bluntly: “It is safe to say that not more than a very small percentage of Marxian Communists have ever read ‘Das Kapital' or any of their master’s voluminous writings.” From which we gather at least one of the reasons for his criticism, for, if only a comparatively small number of Marx’s adherents are adequately acquainted with his writings, then it is fairly safe to make any kind of attack upon those writings. One may gain access to a “coward’s castle" at any time, where ignorance and credulity offer an easy passport.

However, what was the materialistic outlook of Marx? Did he fail to observe the operation of what is called the human factor?

These are questions which have often been replied to in the history of Socialist thought and will bear answering again in view of the continuously increasing interest in Marx’s theories.

At the moment we shall do well to let Marx speak for himself. When dealing with a series of events in French history during the nineteenth century Marx wrote as follows:—

“Man makes his own history, but he does not make it out of the whole cloth, he does not make it out of conditions chosen by himself, but out of such conditions as he finds close at hand.”

This is taken from a work in which, from first page to last, he proves how men acting upon the political and economic conditions of their time, exerted a considerable influence upon them. We refer to "The Eighteenth Brumaire of Louis Bonaparte.’’ Again, when contrasting the materialistic views of some of his predecessors with his own, Marx declares in the most unmistakeable manner:—

“The materialistic doctrine that men are the products of conditions and education, different men therefore the products of other conditions and changed education, forgets that circumstances may be altered by men and that the educator has himself to be educated.” (Engels, “ Feuerbach,” appendix, page 130.)

What could be more dear and comprehensive than these two statements. Those who really want to understand will find in them the foundation stones, so to speak, of the science of sociology, the science dealing with human society, and the history of its development.

But to return to the matter of Marx’s materialistic outlook upon mankind. The materialist attitude of mind, both in science and philosophy, Which took definite form in the eighteenth and nineteenth centuries, was the result of a lengthy process of investigation made by thinkers over many centuries. Hence, apart from certain definite modifications introduced into materialist thought by Marx, materialism as a doctrine was no more the exclusive product of Marx’s brain than the general theory of organic evolution was that of Darwin’s. Historically considered, the foundations of materialism were laid by some of the greatest thinkers of Ancient Greece. Democritus, Heraclitus, Empedocles, Aristotle and Hippocrates, were among the ancient minds who formulated the rough and ready groundwork of all modern materialist methods of thought, despite the fact that they lacked the solid backing at the disposal o£ modern scientific workers.

Democritus formulated his world-renowned theory of the atom and indicated the general truth upon which modem science rests, namely: “Nothing comes from nothing, and nothing is ever annihilated.” In this view-point he was followed by a number of thinkers who endeavoured to explain the whys and wherefores of existence, aiming all the time to find the cause or causes of things within nature’s own operations. Some idea may be gathered of the influence these men had on the world of thought and understanding immediately around them, from that powerful poem of classical antiquity, ”Of the Nature of Things,” by the Roman poet, Lucretius. He attempted to explain the many phases of existence, including man himself, biologically considered, and the rise of mankind from the savage to the civilised state, by means of purely natural causes. Amongst his most notable examples in this direction are his suggestions on the origin of speech and language. Says Lucretius: —

“ But Nature ’twas

Urged men to utter the various sounds of tongue. 

And need and use did mould the names of things. 

About in same wise as the lack-speech years,

Compel young children unto gesturings 

Making them point with finger here and there, at what’s before them.

For each creature feels by instinct to what use to put his powers.”

Of course, modern scientific thought would not put it in quite this way, but it cannot be logically disputed that here, at last, are the germs of a rational interpretation of natural phenomena.

In effect, the whole mode of reasoning here referred to marked a revolutionary departure from the primitive and age-long method of regarding all manifestations of existence as though some power or powers outside and above nature guided and controlled existence. Those of our readers who are desirous of obtaining detailed information concerning the methods of enquiry of the Greeks, and even thinkers of recent times, should consult ”The Biographical History of Philosophy,” by George Henry Lewes. This work is easily one of the best of the nineteenth century’s productions.

However, it is not without significance that these early attempts at a true understanding of nature’s workings were suppressed or kept in the background by the tyranny exercised by and through the power of “Holy Mother Church," but a discussion of this need not detain us at this juncture.

But when the revival of learning and the spirit of “free" enquiry arose after the “long winter sleep of the Christian Middle Ages," the formulas of some of the Greek thinkers were revived and re-employed in investigation, but this time with the more ripened experience and accumulated knowledge of a later social advancement. Perhaps it will appear strange to some to learn that, in the words of Engels: “The original home of all modern materialism, from the seventeenth century onwards, is England." A nasty knock this for those who attribute the origin of materialism to Germanic sources in the attempt to preserve the illusion of “English respectability."

Bacon, Hobbes, Locke, Hartley, Priestley and others form a band of thinkers who, by the scientific method of observation and experiment in their various fields of research, helped to furnish the truth of modern materialist thought. Further, the growth of the various natural sciences from the fifteenth century onwards until the explanation of the origin of species by Charles Darwin, in the middle of the nineteenth century, mainly settled the question as to whether natural phenomena had a natural or supernatural origin.

Astronomy, Physics, Chemistry, Geology and Biology were the sciences which, each in their turn, presented the world with a picture of nature's workings without the aid of any external power. In strict logic the “Gods" were consigned to the limbo of the dark and ignorant past.

Pierre Laplace, the eminent French astronomer and mathematician, truly summed up the position in his reply to Napoleon. Asked by the Emperor why he had not even mentioned the supernatural in his work, “Mecanique Celeste," Laplace replied: “Sire, I have managed without that hypothesis."

Nevertheless, despite all that had been accomplished in the physical sciences, the last stronghold of supernaturalism was, as yet, to be conquered, namely, human society and its history, the science of sociology was yet to be placed upon a sound foundation.

It was inevitable that as something approaching exactitude had been established in the natural sciences, human history and its modes of being mid becoming could not for long be left outside the general trend of scientific thought and classification. Unquestionably, it was no mean task to survey the history of human society and reduce its movements to the operation of ascertainable natural laws, for the simple reason that history had mainly presented itself as a “ crude heap of irrationality and violence." The great task consisted in discovering some sort of order in the seeming disorder of historic events and their relationship and interconnection with one another. Further, was human society and its mode of being always the same as it presented itself to the general view of the nineteenth century, or had it also experienced an evolution, a process of development, such as had been ascertained in the purely physical world? In other words, could the principle of natural causation apply here as elsewhere? An affirmative answer to these questions was finally given by means of the materialistic method.

Thomas Henry Buckle, the author of the introduction to “The History of Civilisation in England," is outstanding among a few historians who made noteworthy attempts to formulate the laws of social development. Buckle saw clearly enough that such notions as chance action, the alleged free will of man theory, the doctrines of predestination and supernatural guidance could account for nothing of value to the problem of history. Moreover, he openly said so. Buckle went direct to the purely physical surroundings of mankind to find an explanation. Climate, Food, Soil and the General Aspect of Nature were the agents chosen by him to explain the rise and growth of society and its institutions. Rightly or wrongly this was a method of historical research which cannot be said to be other than materialistic throughout. It sought the material background of human existence as the propelling force behind the rise of society from its earliest beginnings.

But Buckle's theory of physical geography fell short in its application to the major question to be answered. Granted that it could account for the background, so to speak, of human endeavour in its earlier stages, but since the conditions of physical geography remain fairly stationary over immense periods of time, they could hardly be said to account for the many remarkable changes in human society that have taken place in historic times.

The real explanation to the problem was discovered and most comprehensively stated by Marx, with Engels and the American Ethnologist, Lewis Henry Morgan, making the same discovery independently of each other. This explanation is now known throughout the world as the materialist conception of history. Briefly, it is founded upon the recognition of the simple fact of organic existence, not, by the way, disputed within the domain of biology, that the primary need of mankind is the acquisition of the means of subsistence, and, therefore, the manner by which these are produced and distributed, forms the basis of all social organisation, no matter how varied the form such social organisation may take.

Further, this theory ascribes the final causes of all great social changes, namely, the changes from one form of society to another, to the changes which take place in the means and methods of producing and distributing the wherewithal to live, whatever form they may take, at particular stages of social development. We respectfully ask readers to note the phrase, “final causes of social change," and not the sole causes as is so often wrongly conceived or stated.

However, this is the essence of Marx’s crowning "crime," to use the phrase of our critic, his "materialistic outlook upon the economic activities of mankind."

From what we have so far stated, it should be perfectly plain that materialism as a system of thought amounts to our accounting for the operation of natural forces, through "laws" of nature herself. Observation and experimentation with the facts of existence, with verification through experience, is ^the kernel of the materialist doctrine. As far as human knowledge extends, the principle of causation is seen to be operative throughout nature, in all its manifestations, and whoever seeks to overthrow the materialist method must produce from nature something without a cause. We leave to other minds, however, this attempt at miracle working.

Robertus.

(To be continued.)

Marxian Economics (2002)

Book Review from the June 2002 issue of the Socialist Standard

Karl Marx and the Classics. An Essay on Value, Crises and the Capitalist Mode of Production. By John Milios, Dmitri Dimoulis and George Economakis. Ashgate. 2002.

The book’s title reflects the fact that in one sense Marx was in the tradition of Classical Political Economy, building on the work of Adam Smith and David Ricardo both of whom like him propounded a labour theory of value. On the other hand, Marx regarded his work as a “critique of political economy” (the title of one of his books and the subtitle of Capital).

Marx’s critique is straightforward enough. Smith, Ricardo and the others imagined that they were studying economics as if it were a natural science like physics or chemistry whose laws were valid for all times and places. Marx pointed out that what they (and he) were in fact studying were phenomena that only came into being under specific historical and social circumstances – predominating production for sale on a market with a view to profit – and that the laws and categories they used (such as value, price, money, wages, profits, rent and interest) were not useful or valid for all time and for all economic systems. Value didn’t exist before capitalism came on to the historical scene and wouldn’t exist after capitalism had disappeared.

This meant, the authors point out, that when Marx used the word “value” he did not mean the same thing as, in particular, his immediate predecessor, Ricardo. Whereas for Ricardo value was an empirically observable phenomenon that could be measured directly in terms of the amount of socially necessary labour-time needed to produce it from start to finish, for Marx value was an intangible social relation and which would exist under any economic system. As such it could not be measured directly, not even in terms of labour-time. All that could be measured was its expression as “exchange-value”, ultimately as a monetary price (which, due to the averaging of the rate of profit, was only indirectly linked to a commodity’s notional labour-time content).

The authors criticise Marx for not always sticking in his writings to this distinction and for occasionally slipping back into Ricardo’s position. This may well be true – there is certainly a discrepancy between his endorsement, albeit rather lukewarm, of labour-time vouchers in one place and his devastating criticism of schemes for labour-money elsewhere – but it should be borne in mind that in his first publications – The Poverty of Philosophy (1847) and A Critique of Political Economy (1859) – Marx didn’t distinguish between value and exchange-value and that, apart from Volume I of Capital (1867), all his other writings on economics were unedited, hand-written notes, prepared for publication by others after his death (Volumes II and III of Capital, Theories of Surplus Value, the Grundrisse). Since Volume I of Capital was carefully edited and seen to publication by Marx himself (incidentally, after most of his posthumous publications had been written) in cases of ambiguity or even contradiction it is what he wrote in this that must be regarded as his considered view.

On two keys points of understanding the way capitalism works the authors reach the same conclusion as we have, on the so-called “law of the falling tendency of the rate of profit” and on the reason for economic crises.

Much ink has been spent on the falling rate of profits (sometimes called, in view of so many predictions which failed to materialise, the falling rate of prophets). Many consider it to be a key element of Marxian economics, an economic law of capitalism uncovered by Marx. Marx’s point is simple enough. Capital is divided into “constant” capital (buildings, machinery, materials, etc) whose value is simply transferred unchanged to the product in the course of its production and “variable” capital (the capital laid out in employing productive labour) so-called because this is the only element of total capital whose value “varies” through productive wage-labour producing a “surplus value” over and above its original value. Marx calls these C, V and S respectively and so expresses the rate of profit as: S/(C + V). It is clear that, from a purely mathematical point of view, that as long as S/V (the rate of exploitation) remains unchanged if C increases faster than V the rate of profit will fall. Marx set out one good reason why C would tend to increase faster than V: technological advance. With this more of the accumulated capital takes the form of means of production (C) than of additions to the wages bill (V).

However, Marx deliberately chose not to call this the “law of the falling rate of profit” but merely the “law of the falling tendency in the rate of profit” (an odd formulation since something must either be a law or tendency but not both, but this was taken from one of Marx’s unedited papers). This was because he knew that other factors than technological advance could affect the outcome and that it could not be assumed that these would always be constant (as “the law of the tendency” as stated above assumed). Marx went on to list various “counter-tendencies”. Two in particular stand out.

The first is what he called the “cheapening of the elements of constant capital”, by which he meant factories, machinery, etc, and the ways of using and organising their use, becoming cheaper than previously. For instance, technical advance need not necessarily translate itself into C rising faster than V and would not if the inventions and innovations were more “capital saving” than “labour saving”. C could also rise less than V for non-technological reasons such as falls in raw material and energy prices due to market conditions.

The second was an increase in the rate of exploitation (S/V), i. e., the amount of surplus value produced per unit of productive wage labour. This in fact is another consequence of technical advance and indeed, under capitalism, is precisely why technical inventions and innovations are introduced, the capitalist class waging a non-stop class war against the working class to increase the amount of surplus value extracted from their labour—what might be called the “law of the rising tendency of the rate of exploitation” or indeed even the “law of the rising rate of exploitation”.

It should be clear that if C does not increase faster than V and/or if S (the amount of surplus value) increases, then (other factors remaining the same) the rate of profit (S/C + V) will not fall. Which means that, in the world of real capitalism, the outcome of these tendencies and counter-tendencies cannot be predicted in advance. As the authors put it:

“. . . the Marxist ‘law of the falling tendency’ in the rate of profit, although logically sound, is not a theoretical reflexion of the actual trend of the rate of profit . . . it applies under certain conditions . . . that may well not exist in a given capitalist society. Furthermore, it influences the rate of profit along with a variety of other factors not directly associated with technological innovation, factors which Marx considered to remain constant when presenting his ‘law’. This means that a falling profit rate in a given capitalist economy over a time period, which may be established on the basis of concrete empirical analysis, can be due to factors other than those related with technical innovation and the ‘law of the falling tendency’, which means that a further investigation will be necessary, if one wants to locate the exact causes of the profit rate’s course” (pp. 155-156).

The authors take the same approach to the reason for economic crises under capitalism to reject the same views held by some in the Marxist tradition as we do:

“Crises are conjunctural suspensions of the conditions for unimpeded reproduction of total social capital. They constitute transitory manifestations of the internal contradictions of capitalism and not permanently operative causal relationships inherently governing capitalist relations (a permanent deficiency in consuming power as against production, or the ever acting ‘law of the falling tendency in the profit rate’)” (pp. 182-3).

We are obliged to add that chapter 4 on “The Question of ‘Commodity Fetishism’“ is both confused and confusing and detracts from the rest of the book. In fact, when the authors venture into philosophical matters they follow too much the theories of the now completely discredited French philosopher, Louis Althusser, who ended up murdering his wife and confessing that the only work by Marx he had read properly was his journalistic The Eighteenth Brumaire of Louis Napoleon. There is also a hint, at the very end of Chapter 3, that the authors could think that the banking system has the power to “create” a “volume of credit . . .which constitutes a multiple of all forms of liquid assets and reserves”. If this were true—that the banks can lend out more, much more than what has been deposited with them – then it wouldn’t be true that labour is the sole source of newly created value. Not only Marx but the Classics Smith and Ricardo too would have been mistaken.

Adam Buick

How we perceive work (2024)

From the March 2024 issue of the Socialist Standard

The ancient Chinese philosopher, Confucius is reputed to have once said ‘Choose a job you love, and you will never work a day in your life.’ Though there is considerable doubt that he ever said such a thing, it is quite an apt expression. It neatly encapsulates a fairly widely held view of work as a something that, for the most part, we do not love and an activity that we would not choose to engage in unless compelled to do so.

In similar vein, the anarchist Bob Black begins his 1985 essay, The Abolition of Work, with the rousing statement ‘No one should ever work. Work is the source of nearly all the misery in the world.’ Black, like Confucius, is obviously equating work here with coerced labour – waged employment – and counter-poses to this the idea of ‘play’ by which he means free creative activity.

It’s a question of semantics really but, clearly, you don’t need to define ‘work’ as coercive per se; you can distinguish between cases where this is true and cases where it is not – where the latter might very well also entail ‘free creative activity’. Dictionaries to some extent reflect this ambiguity. Thus, we find in the online Merriam-Webster dictionary, ‘working’ being defined as ‘to perform work or fulfil duties regularly for wages or salary’ but ‘work’ as applying to ‘any purposeful activity whether remunerative or not’ or even ‘something produced by the exercise of creative talent or expenditure of creative effort : artistic production.’

Disutility

Adam Smith started out from the basic premise that human beings were inherently lazy. Work was really a form of self-sacrifice rather than of self-expression. As he put it, ‘What everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.’ That also articulates, in a nutshell, his labour theory of value. The worker´s reward for sacrificing ‘his tranquillity, his freedom, and his happiness’ was his wage.

Smith´s negative attitude towards work was mirrored in the writings of others such as the Utilitarian philosopher, Jeremy Bentham. Bentham opined that our love of ease stemmed from our aversion to labour. Labour was painful and human beings had a natural disposition to avoid pain and seek pleasure – or, in this instance, leisure.

Neoclassical economists, like Jevons and Alfred Marshall in the late 19th century, built on Bentham’s utilitarian arguments but substituted the more technical sounding term, ‘disutility’, for ‘pain’. To ensure that work gets done, without which society would collapse, requires ‘compensating’ workers with a wage for the disutility their work entails.

This idea of ‘compensation’ was not new – in fact, it goes back to antiquity but was then more commonly associated with some form of redress for harm or negligence caused. The specific sense used here – the payment of wages or salaries for doing work – became more common only when the experience of wage labour itself became more commonplace with the rise of capitalism.

Of course, the notion that work is, by its very nature, a disutility is little more than a transparently self-serving sleight of hand that seeks to justify the existence of a system of wage labour – and by extension, capitalism – as being indispensable to the performance of work upon which our collective survival depends. Wage labour may be a disutility, but it does not follow at all that work, as such, needs to be.

Though Marx adapted Smith´s labour theory of value to fit his own narrative, he was quite scathing about Smith´s equating of work with toil:

‘In the sweat of thy brow shalt thou labour! was Jehovah’s curse on Adam. And this is labour for Smith, a curse. “Tranquillity” appears as the adequate state, as identical with “freedom” and “happiness”. It seems quite far from Smith’s mind that the individual, “in his normal state of health, strength, activity, skill, facility”, also needs a normal portion of work, and of the suspension of tranquillity. Certainly, labour obtains its measure from the outside, through the aim to be attained and the obstacles to be overcome in attaining it. But Smith has no inkling whatever that the overcoming of obstacles is in itself a liberating activity – and that, further, the external aims become stripped of the semblance of merely external natural urgencies and become posited as aims which the individual himself posits – hence as self-realization, objectification of the subject, hence real freedom, whose action is, precisely, labour. He is right, of course, that, in its historic forms as slave-labour, serf-labour, and wage-labour, labour always appears as repulsive, always as external forced labour; and not-labour , by contrast, as “freedom and happiness”’(Grundrisse, Chapter 12).

Free creative activity

If there is a disinclination to work on the part of the great majority there is nothing ‘natural’ about it. It is simply a gut reaction to the particular form that work takes in a society that is fundamentally orientated to serve the interests of the few who don’t need to work and not the many who do.

Of course, in these circumstances people will be disposed to view work negatively. That´s perfectly understandable. It is always going to be difficult to overcome this ingrained prejudice when the basic relationship between employers and employees is essentially a coercive one and when that key institution of a capitalist economy – the business firm – is itself a fundamentally authoritarian arrangement.

Who particularly enjoys being bossed around and economically forced into engaging in an activity that is not primarily done for their benefit, anyway?

But what of work after the abolition of the wages system in a post-capitalist society? Could it become the free creative activity that Black envisaged? A transformation of work into free creative activity would, in a sense, abolish the very concept of a ‘working day’ by effectively eliminating the distinction between what we call ‘leisure’ and what we call ‘work’.

Work would still be work, not quite leisure, in that case, even if the difference between them – for example in terms of the sense of fulfilment and pleasure each activity afforded the individual – would narrow considerably. The difference perhaps might be that work is something more purposeful or linked to the satisfaction of other needs, than is true of leisure.

Robin Cox

Cooking the Books: What is productivity? (2023)

The Cooking the Books column from the November 2023 issue of the Socialist Standard

‘Productivity — the amount we produce per worker or per hour worked — is very important’, wrote David Smith, the economics editor of the Sunday Times. ‘It is the ultimate driver of living standards, a key determinant of real wages and a vital component of competitiveness’ (Times, 20 September).

On the face of it, this makes sense. If society can produce a larger surplus over and above current consumption then some of it can be used to increase what is consumed, whether by individual persons or as improved collective services and amenities. That is what would happen if the aim of production was to directly meet people’s needs. But it isn’t. It’s to make profits to re-invest to make even more profits. It is this that drives the economy.

But how is the productivity Smith talks about measured? He states specifically that productivity at the level of the whole economy is measured by GDP per total hours worked or GDP per total number of workers. In other words, you take GDP and divide it by the number of workers or by the number of hours they worked. In 2021 the increase was 2 percent per worker and 2.8 per hours worked.

Leaving aside how accurate (or not) GDP is as a measure of ‘what we produce’ over a period such as a quarter or a year, what about the divisor, the number of workers or the total hours they worked over the same period?

Smith’s namesake pointed out 250 years ago that there were two kinds of work and workers.

‘There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance, and of his master’s profit. The labour of a menial servant, on the contrary, adds to the value of nothing’ (Wealth of Nations, Book II, chapter III).

Marx inherited this distinction between productive and unproductive labour but modern economists and statisticians have abandoned it; they regard all workers as productive. To divide the value added in a year by total number of workers is absurd as a measure of productivity. It is as if in Smith’s day the new value produced was divided by the number of ‘manufacturers’ (productive workers) plus the number of ‘menial servants’. Whatever this measured, its increase would not be a measure of the extra wealth available to improve living standards.

To measure productivity and its increase properly total value added should be divided by the number only of productive workers. This involves making a distinction between productive and unproductive workers. It is something national income statisticians are capable of doing but don’t because it is not considered useful for capitalism. For a start, they could take out the number of ‘menial’ servants employed by the rich and then the not-so-menial servants who work for the government and parastatal organisations at national and local level. Most of them are essential to the operation of capitalism (and some would be in any society); they are part of the incidental running costs of capitalism and are paid out of capitalist income taxed by the state. They work but they don’t add any new value.

What the statisticians call ‘productivity’ is still useful under capitalism as it is ‘a vital component of competitiveness’. In fact that, basically, is what it is measuring, a vital statistic for capitalism. It can be increased not just by making the productive workers more productive but also by spending less on ‘unproductive’ work. An additional reason why using any extra surplus to provide more and better public services cannot be a priority. Competitiveness is more important.

Adam Smith on the origin of profits (2023)

From the June 2023 issue of the Socialist Standard

This year is the centenary of two of the pioneers in the study of what is now called the capitalist economy. Sir William Petty was born 400 years ago in May and Adam Smith 300 years ago this month. Smith is by far the better known but Petty deserves credit for succinctly expressing a key part of the Labour Theory of Value: ‘labour is the Father and active principle of Wealth, as Lands are the Mother’. In other words, wealth is produced by humans exercising their physical and mental energies to transform materials that originally came from nature into useful things.

This was so obvious that Smith took it for granted, as in the opening lines of The Wealth of Nations, published in 1776:

‘The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes…’

This is not yet a labour theory of ‘value’ (a theory of what lies behind the price of goods when they are produced for sale) but modern economics textbooks refuse to acknowledge that only ‘labour’ — humans working on materials from nature — creates new wealth. They want a role for ‘entrepreneurs’, as they call capitalists. What they are trying to do is to provide a justification for profits. They could do this, as in fact Smith does, without denying that wealth is only created by humans working on materials from nature, but they are not prepared to accept even this because of its possible anti-capitalist implications.

Smith does in fact go on to put forward a labour theory of value. But, even on the basis that only human work produces wealth, Smith can be shown as accepting that profits derive from what wage-workers produce.

He argues that, in an early stage of economic development, producers did receive the full product of their labour, but once a stock of wealth, in the form of instruments of production and means of subsistence, had come to be owned by individuals, the position changed. The producers had to cede a portion of what they produced to their employer:

‘As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of the materials. In exchanging the complete manufacture either for money, for labour, or for other goods, over and above what may be sufficient to pay the price of the materials, and the wages of the workmen, something must be given for the profits of the undertaker of the work who hazards his stock in this adventure. The value which the workmen add to the materials, therefore, resolves itself in this case into two parts, of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced. He could have no interest to employ them, unless he expected from the sale of their work something more than what was sufficient to replace his stock to him; and he could have no interest to employ a great stock rather than a small one, unless his profits were to bear some proportion to the extent of his stock’ (p. 37, chapter VI of Book I, italics added).

This is Smith explicitly saying that profits come from the value added to capital by the work of those employed, even if he considers this justified by the risk taken by the employer.

He repeats this later when discussing productive and unproductive labour (where he is using the word ‘manufacturer’ in its original and logical sense of someone who makes something with their hands, not its current distorted meaning of ’employer’):

‘There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance, and of his master’s profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he, in reality, costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers: he grows poor, by maintaining a multitude of menial servants’ (p. 253-4, chapter III of Book II, italics added).

Smith was no socialist and he did advocate laissez-faire capitalism, but this doesn’t detract from the fact that he accepted a theory of wealth which showed that profits derive from what wage-workers produce.

Adam Buick

Adam Smith versus the Adam Smith Institute (2023)

From the June 2023 issue of the Socialist Standard

If Adam Smith has a bad reputation amongst socialists it is not his fault. Marx himself had a high regard for Smith and discussed his views in great detail. It’s the fault of people like those who set up the Adam Smith Institute in 1977 to campaign for governments to give capitalist corporations a free hand to pursue profits as they think fit.

Writing in the middle of the 18th century — he was born in 300 years ago in 1723, published The Wealth of Nations in 1776, and died in 1790 — Smith was a witness to the beginnings of industrial capitalism in Britain. His book was written as a criticism of the policy (known as ‘mercantilism’), pursued by governments in his day, of trying to encourage exports by subsidies and restrict imports by tariffs with a view to building up the amount of gold in the home country. He wanted such government intervention to be ended and advocated instead laissez-faire, with governments letting the market function freely, as the best way to increase a country’s wealth.

Smith believed that he was discovering the natural laws of ‘political economy’ and adopted an objective, scientific approach to the subject. This was what Marx admired in him. He realised that Smith was genuinely trying to understand how capitalism worked, unlike the ‘vulgar economists’ of his own day who were merely ideological apologists for capitalism. His criticism was that Smith thought he was discovering natural laws whereas he was studying those only of one particular, transitory economic system. This was in fact Marx ‘s criticism of the whole school of economic thought that Smith’s book gave rise to, his ‘critique of political economy’ (the sub-title of Capital).

The Wealth of Nations famously begins with Smith’s analysis of the division of labour and how this allows more wealth to be produced, using a pin-making factory as an example (incidentally, a sign of the low level of industrial development in his day). He goes on to examine the concept of ‘value’, distinguishing between ‘value-in-use’ and ‘value-in-exchange’. It is the latter that interests him as a student of economic phenomena. His conclusion as to what measures the exchange-value, or price, of a commodity will come as a shock to some of his modern-day admirers:

‘The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities’ (Book I, chapter V).

This was too much for the Adam Smith Institute and has led Eamonn Butler, the Institute’s Director, in his The Condensed Wealth of Nations on their website, to virtually repudiate it:

‘For many commentators, this looks uncomfortably like a crude labour theory of value, which focuses on production costs and overlooks demand. Some argue that it led Karl Marx into his appalling errors about labour. One could defend Smith as just trying to simplify things by talking about an age before land or capital ownership, where labour was the sole production cost, and temporarily ignoring other factors such as land and capital, and also ignoring demand, all of which he goes into later. At best his words are misleading, at worst they are mistaken: but then he was breaking new ground’ (www.adamsmith.org/the-wealth-of-nations).

The ‘defence’ that Smith was writing of a time before there was ‘land and capital ownership’ does not stand up, as Smith explicitly stated that he was writing of a situation when ‘stock has accumulated in the hands of particular persons’. That the Adam Smith Institute should find Smith’s ideas here ‘uncomfortable’ is easy to understand.

Smith can certainly be called an advocate of capitalism, though not of the corporate capitalism we know today and for which the Adam Smith Institute stands. In Smith’s day, if you were a capitalist employer you risked everything should your business fail, as today’s generalised limited liability did not exist. You were personally responsible for all your business debts, so that if your business failed disastrously you could end up in a debtor’s prison. Capitalists take no such risk today; with limited liability, they are only liable for the amount they have invested.

Such companies did exist in Smith’s day but they had to be set up by Royal Charter or Act of Parliament, such as the East India Company. The irony is — at least for those who try to project Smith as a defender of capitalist corporations — that he didn’t like these, for the same reason that the Adam Smith Institute and other free-marketeers don’t like government-run industries: that the people in charge were managing other people’s money and not their own and so wouldn’t be so concerned about avoiding waste and inefficiency; the famous invisible hand would not necessarily move them to act in the general interest.

The only activities in which Smith accepted that ‘a joint stock company’ was justified were banking, insurance, canals and water supply. This is another sign of how undeveloped capitalism was in his day, as the limited liability company is now the predominant form of business enterprise and essential to modern capitalism. The amount of capital required to run a capitalist enterprise is now too large to be raised by a single person (just as canals were in Smith’s day). Which shows that the era of individual capitalist ownership (where most ideological defenders of capitalism seem to be stuck) is a thing of the past, making the individual capitalist owner economically and socially redundant.

It shows that while in Smith’s day individual, private enterprise was viable this has long since ceased to be the case. Today production is too big for that; it is already socialised from a technological point of view in the sense of involving a vast network of producers to produce something. The problem is that control of production is not. This contradiction between socialised production and non-social ownership and control is the cause of today’s economic and social problems. The corporate ownership that has evolved to replace individual ownership is not the answer; in many ways it makes things worse. Nor is state ownership the answer. Both are still forms of sectional ownership. The contradiction can only be resolved by socialism where the means for producing wealth becomes the common property of society as a whole, under democratic control.

Adam Buick

The dark religion of bourgeois economics (2023)

From the June 2023 issue of the Socialist Standard

After acquiring political dominance in England during the revolutions of the 17th century in the name of the Jesus Myth, the capitalist class would come to nurture an even more malevolent ideology centred on an equally fictitious myth called ‘the free market’. With the help of that luminary of the Enlightenment, Adam Smith, the economics of exploitation were elevated to a force of nature which rivalled Christianity in its malignancy and the suffering it would sanction. His infamous remark concerning ‘the invisible hand’ implied a kind of transcendental force that was superior to mere human judgement and that directly contradicted the Enlightenment project of subjecting all knowledge to human reason thus casting aside all such superstition. The Enlightenment would, in terms of science, help guide humanity out of the darkness of religion only to, in the hands of bourgeois economic propagandists, replace it with the cult of worshipping at the altar of the free market. Like Napoleon the English bourgeoisie were not interested in reason, science or logic but only in an ideology that would serve their never-ending hunger for wealth and power.

This mystical force is a manifestation of the bourgeois need for an ultimate source of authority. In the absence of a deity they substituted another non-human entity to reinforce the ‘truth’ of their ideology. In their defence of the capitalist system against any perceived threat from ‘socialism’ its defenders give the impression that their preferred economic mechanism was conceived and created with a meticulous precision that was motivated purely by the health of society. In fact, historically speaking, this ruling class had no idea of the shape and evolution of capitalism once they freed it from feudal shackles. Like a monstrous juggernaut its momentum was unstoppable as it covered the planet with pollution, war, economic depressions and shattered the lives of all those who were enslaved by its overwhelming need for profit. Those who worshipped at its altar explained the failures and disasters in terms of government betrayal of free market principles or the immoral activities of renegade monopolists and financial pirates etc. Indeed, how could anyone criticise such a powerhouse of technical innovation and wealth creation?

But those who created the wealth were beginning to become sullen and bitter about their lack of a share of it all. The politically more astute among the bourgeois intelligentsia recognised that the system was unable to provide even the most basic necessities of life for workers and so decided to create an infrastructure and welfare system that would forestall any revolutionary inclinations among the masses. It was not only the fear of insurrection but also the need to maintain a healthy workforce together with a dread of the creation of monopolies, which might hold them all to ransom, in transport, raw materials and power etc that brought into being the nationalised or ‘public’ sector. This arrangement, in its turn, created further problems because, as it was financed by taxation, it was always strapped for cash due to that other commandment of capitalist religion: ‘Thou shall not financially burden the wealthy’. Although this ‘mixed economy’ has been the model for most advanced capitalist states ever since whenever things go wrong, as the inevitable instability of production for profit always does, the political and economic debate is invariably split between those who blame too much state interference (the Right) and those who claim that free market deregulation is at the heart of the problem (the Left). We still live with a stalemate produced by the failure of both.

Marx had proved that profit was nothing more than theft. The value of labour power as incarnated in its price (wages) is considerably less than the value it produces. Since the capitalist can sell the products of labour at their full value he could pocket the difference as ‘profit’. This is the inevitable logic of the labour theory of value that was embraced by the ‘classical economics’ of Smith and others. This unpalatable moral and political truth did not fit the needs of the ideology, and bourgeois economists have desperately tried to disprove it ever since the publication of Marx’s Capital. Almost the whole body of contemporary economics is an attempt to justify exploitation in various and ingenious ways and so discredit Marx’s definitive theory. It is the height of irony to try and dismiss the Marxian model as an anachronistic Victorian economic theory when those who oppose it have nothing more to offer as an alternative than a version of ‘laissez-faire’ which predates Marx by a hundred years and more!

With the denial of Marx’s discoveries it would seem that economics as a science has not progressed like the other disciplines dignified by that title. For all the power generated by the latest computer programs available to the City and other financial institutions the system continues to crash and burn periodically, and even when it does ‘work’ the exploitation of the many by the few produces endless industrial struggle and alienation. The programmers are still directed to search for ever better ways to increase profit margins and the shiny modern computer interfaces and endless economic double-talk cannot disguise the ancient inhuman God of greed that motivates it all and so disfigures our species.

Wez.

Economics and Ideas. Their influence on Political Institutions. (Part 4) (1925)

From the July 1925 issue of the Socialist Standard

(Continued front last month).

The Machine Age.

Towards the end of the eighteenth century there were then three powerful states in which the class with free bourgeois property, alone or, in England, in conjunction with a commercialised landed-class, ruled society.

It is well to bear in mind the economic stage that had been reached. A majority of the population still lived either wholly or in part on the land. All industry was on a relatively small scale with tools that were individually operated. Production for sale was widespread, but not universal as it is to-day. The supply of materials and the marketing of the product was largely in the hands of merchants and great trading companies. The merchant capitalists had a powerful hold over industry, but the genuine industrial capitalists were few and relatively unimportant.

The workers—the “common people”— were illiterate, inarticulate and unorganised. For the most part they accepted without question the lowly position and toil to which Providence for its higher purposes had consigned them, and they looked upon the affairs of government as the natural and rightful monopoly of “their betters,” the “gentlemen,” the “people of quality,” elegance and education.

But into the apparently stable, easy-going complacent world of eighteen-century England burst an economic tornado that was destined to sweep the whole “bag of tricks” into the museum of antiquities and to create a new civilisation. This power was that child of science and economic necessity—the industrial revolution.

As machine-production extended itself to an ever wider sphere of industry, the whole complexion of social relations was transformed. Of little significance hitherto, the class of capitalist factory-owners now waxed fat in wealth and importance. But at the opposite social pole there gathered an ever-swelling multitude of propertyless wage-earners, factory hands, machine-driven and disciplined, separated entirely from the soil and herded, amid unprecedented squalor, into dismal industrial towns scattered over the coalfields.

The slow, steady controllable methods of the age of hand-tools were replaced by the uncontrolled production of commodities en-masse, by a ceaseless effort to cheapen production and by a wild competitive scramble to sell. In an industrial anarchy without parallel the only regulation and order came through the blind balance of the market, through the inexorable operation of economic forces. “Economic law”—that made and unmade—became the “divine principle” of a new philosophy of social life. Its prophets were the “economists.” They endeavoured to convince the workers as they had succeeded in convincing themselves that the wealth of the rich and the destitution of the poor were due to the “natural,” “eternal” laws of wealth creation that could neither be avoided, controlled, nor—with safety—interfered with.

The bible of the new thought was the “Wealth of Nations,” by Adam Smith, one of the most practically effective books ever written. In it was put forward not alone the economic theory of unbridled competition, but its natural, ethical accompaniment, that the general happiness of society is best secured by the assiduous devotion of individuals to their own interests. In the turmoil of the economic scramble, unlimited wealth and power seemed open to the man of initiative, nerve, organising ability and—capital. Competition, emulation, struggle, were elevated to the dignity of moral principles. The duty of “getting on” was proclaimed. “Hard work” became a virtue par excellence—though not always practised by its preachers. The conviction that the individual is superior to, and can dominate the “fell clutch of circumstance,” gained a hold upon men’s minds.

The idea of “progress” as an accepted moral principle dates from this dawn period of industrialism. For the first time in history men could see society being transformed before their eyes—not the mere outward change of political forms or the disruption due to war, but a steady, unceasing progression in one constant direction. For the first time men in general could predict the certainty of development in the future. Men no longer worshipped the past—the “good old days”—they looked ahead, and let their imaginations play tricks. To stand still, to stagnate, became a moral evil—to move, to progress, a moral excellence.

Amongst the political adaptations to the economic needs of the new era the most outstanding were those resultant upon the doctrine of “laissez faire”—the freedom of production and trade from legislative interference, expressed in the “liberalism” of Cobden and the “Manchester School.” The old restrictive Navigation Acts and the Corn Laws were abolished and all fetters removed upon the perfect liberty to buy in the cheapest and sell in the dearest market. Upon the principle of “unfettered production” the fullest exploitation of the worker, regardless of life or health or age or sex, was justified, and it was nominally on the ground that they were “restraints upon trade” that the early trades unions were declared illegal in the Combination Acts of 1799-1800, and thus the attempts of the workers at organised resistance forcibly repressed by the State.

The politics of the “new age” were soon also violently complicated by the struggle of the new capitalists for political power. The necessity of the conflict sprang largely from the fact that the industrial revolution had transferred the mass of production and population to the north and west, areas hitherto thinly populated and economically of little importance. Large industrial towns, such as Birmingham, Leeds and Manchester, were entirely without representation in Parliament. A further factor of importance, however, was that the new industrial conditions had produced a large, politically conscious body of lesser capitalists with an intense appreciation of the rights and privileges of property—their property, and intolerant of political control by the landlords and merchant princes.

The great reform struggle lasted some forty years and was bitterly contested by the ruling oligarchy. In the hope, encouraged by the bourgeois reformers that they stood to gain, large masses of the workers were drawn into the conflict which again and again reached open violence. At length, amid intense public excitement, the Reform Bill of 1832 was passed, which redistributed seats in accordance with existing economic facts and extended the franchise to some half-million large and smaller property owners. This was the final victory in England of free property over landed privilege—of the precious yellow metal over “precious” blue blood.

R. W. Housley

(To be continued.)

A Lord discovers the real Marx. (1924)

From the September 1924 issue of the Socialist Standard

One does not frequently discover in the books and articles written about Marx by his opponents any genuine attempt to impart to the reader an adequate idea of the contents of Marx’s works. “The Real Karl Marx” (an article by Lord Riddell in John O’ London’s Weekly, July 26, 1924) merits some consideration, however, for, as a travesty of Marx’s teachings, it is rather more absurd than the ordinary bourgeois production.

The purpose of this article is not to discuss Lord Riddell’s method of misrepresentation, but to point out a few slips made by him in his application of that method, in the first place it should be noted that where Lord Riddell falls in the cart (if one may use a proletarian expression in writing of a bourgeois) is in his choice of a victim. It is common knowledge among Socialists that Marx and Engels never did appear particularly well in the “rôle” of victims of misrepresentation of the type now under review. Both of them had a peculiar habit of replying to their critics’ misrepresentations—sometimes half a century or more before those misrepresentations were made.

A few examples will serve to show wherein “The Real Karl Marx” of Lord Riddell differs from Marx. Lord Riddell, discussing the history of Marx’s ideas, writes as follows :—

  “Adam Smith laid down that labour is the source of all wealth and the real measure of the exchangeable value of all commodities (“Wealth of Nations,” 1776). In 1817 Ricardo (1772-1823) published his “Political Economy,” in which he stated that the worker receives as wages only so much as is required to furnish him with the necessities of life estimated according to the custom of the time.

  Marx based his theories for the reconstruction of Society upon a narrow interpretation of these propositions.”

Marx, in his critical notes on the Gotha Programme, says :

  “Labour is not the source of all wealth. Nature, no less than labour, is the source of use-values (and of these material wealth essentially consists); and labour is itself no more than a manifestation of a natural force, human labour-power.”

Marx’s work, “The Poverty of Philosophy,” is itself a reply to the last sentence quoted from Lord Riddell’s article, but the following passage from Engels’ preface to that work may usefully be given here :

  “The above application of the theory of Ricardo, which shows to the workers that the totality of social production, which is their product, belongs to them because they are the only real producers, leads direct to Communism. But it is also, as Marx shows, false in force, economically speaking, because it is simply an application of morality to economy. According to the laws of bourgeois economy, the greater part of the product does not belong to the workers who have created it. If, then, we say, ‘That is unjust, it ought not to be,’ that has nothing whatever to do with economy ; we are only stating that this economic fact is in contradiction to our moral sentiment. That is why Marx never based upon this his Communist conclusions, but rather upon the necessary overthrow, which is developing itself under our eyes every day, of the capitalist system of production.”

A brief examination thus shows that Marx’s alleged “narrow interpretation” is merely the product of Lord Riddell’s imagination.

Elsewhere our critic refers to various matters which, he says, Marx’s theory disregarded. He says : “It also disregarded the necessity of leadership in industry.” Marx’s reply to this may once more be quoted :

  “All combined labour on a large scale requires, more or less, a directing authority, in order to secure the harmonious working of the individual activities, and to perform the general functions that have their origin in the action of the combined organism, as distinguished from the action of its separate organs. A single violin player is his own conductor ; an orchestra requires a separate one.”

Further:

  “Just as at first the capitalist is relieved from actual labour so soon as his capital, has reached that minimum amount with which capitalist production, as such, begins, so now, he hands over the work of direct and constant supervision of the individual workmen and groups of workmen, to a special kind of wage labourer. An industrial army of workmen, under the command of a capitalist, requires, like a real army, officers (managers), and sergeants (foremen, overlookers), who, in while the work is being done, command in the name of the capitalist. The work of supervision becomes their established and exclusive function.”—Capital, Vol. 1, chapter 13.)

Lord Riddell, in the course of a pretence at a representation of what he calls Marx’s theory, says : “The workers, however, become organised and develop class consciousness—viz., a recognition of their rights as opposed to those of other classes.” Marx certainly recognised the necessity for class-consciousness. But “rights” ! How little use Marx’s theory had for the recognition of rights is realised by anyone who has given any attention to his works. Especially in the already-mentioned Notes on the Gotha Programme does Marx deal with this matter. Discussing the expression “equal rights to the whole product of labour,” occurring in that Programme, he shows how “Like all right, therefore, it is substantially an unequal right.” Further on, too, he denounces the “endeavour to uproot the realistic conceptions which (after long labour) have been firmly implanted“ in the minds of our members, and to replace them by ideological fustian about rights and all the rest of it.”

It is possible here only to touch upon a very small proportion of Lord Riddell’s mistakes. The following, however, must be given as his best attempt at concentrated misrepresentation ;

  “The English edition of his chief work, Capital, was issued in 1886. In the preface his co-author, Frederick Engels, committed himself to the statement that British prosperity seemed to have run its course, that we were landed in ‘the slough of a permanent and chronic depression,’ and that the increase of population would shortly lead to a revolution.”

What Engels did write, in his preface, was :

  “The decennial cycle of stagnation, prosperity, over-production and crisis, ever recurrent from 1825 to 1867, seems indeed to have run its course; but only to land us in the slough of despond of a permanent and chronic depression.”—(Capital. Swan, Sonnenschein, Lowrey & Co., 1887.)

The real Engels is as quoted here, and the real riddle is : How did our critic manage to quote nearly a whole line of Engels’ preface nearly correctly? As regards the statement, attributed to Engels, that “the increase of population would shortly lead to a revolution,” it must be admitted that Lord Riddell here deals Engels a nasty blow, the only defence being that Engels did not make that statement.

Lord Riddell gives what purports to be, but most certainly is not, a description ot Marx’s materialist conception of history. What Lord Riddell does not know about this side of Marx’s teachings is evidently well worth knowing. For of Marx he writes : “In 1845 he was expelled from Paris. After this he went to Brussels, where, in conjunction with Frederick Engels, he planned a series of European revolutions to subvert the existing order.” This is the best joke penned by Lord Riddell in his article. Revolutions planned by Marx and Engels ! By those who had formulated the materialist conception of history, according to which the latter is a history of class struggles ! By those who had maintained that “the emancipation of the working class must be the act of the working class itself” ! If Lord Riddell’s version is not a crude joke, then how admirable must have been the modesty of the author of “The Struggle of the Classes in France (1848—1850).”

A clue to the source of Lord Riddell’s mistakes, to use a polite expression, may be found in another of his references to Capital. He remarks : “It is not exciting reading, but its teachings diluted and embellished have been spread in all civilised countries by devoted adherents.” Whether or not Capital is exciting reading depends, of course, upon the reader. But if ever Lord Riddell should desire to become acquainted with the subject of his criticism it would still be of advantage to him to read Marx’s works rather than his “teachings diluted and embellished” by devoted adherents of capitalism.

A. C. Anderton