Cooking the Books: What is a commodity ship? (2026)

The Cooking the Books column from the September 2026 issue of the Socialist Standard

On 29 July Reuters reported that ‘thirty-nine commodity ships passed through the Bab el-Mandeb strait’. A ‘commodity ship’, what is that? Presumably a ship that carries commodities, but what is a commodity? According to Reuters, the ships were all carrying either crude oil or chemical products made from oil.

If you look through a paper like the Financial Times you will come across a page which, alongside a list of share and bond prices, shows the prices of ‘commodities’; besides oil and natural gas, such products as coffee, sugar, cocoa and wheat.

According to Wikipedia, a commodity is

‘an economic good, usually a resource that specifically has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a commodity good is typically determined as a function of its market as a whole. (…) Most commodities are raw materials, basic resources, agricultural, or mining products, such as iron ore, sugar, or grains like rice and wheat. Commodities can also be mass-produced unspecialized products such as chemicals and computer memory. Popular commodities include crude oil, corn, and gold.’

In this sense, commodities are goods that have a single world price. The price of some of them is included in financial publications because financial capitalists speculate on how these prices move as well as on share and bond prices. The fact that their price is fixed by the world market puts countries which depend heavily on producing and selling them at the mercy of world economic forces, with dire consequences when the price falls.

This is a narrower use of the term than in the 19th century when a commodity meant anything useful that has been produced for sale on a market. This definition was shared by Marx. In fact the opening lines of Marx’s Capital are: ‘The wealth of societies in which a capitalistic mode of production prevails appears as an ‘immense collection of commodities’; the individual commodity appears as its elementary form. Our investigation therefore begins with the analysis of the commodity.’

As a commodity is something useful that has been produced for sale on a market, it has an exchange-value in addition to its use-value. Not all useful things are commodities, for example things produced directly to satisfy some need or want, such as food produced by farmers to satisfy their own needs or taken from them to satisfy the needs of some exploiting class. Under feudalism and previous class societies most wealth — useful things — was not produced as commodities.

The two definitions of a commodity are not necessarily incompatible as one can be seen as a subset of the other and closer to the ideal form. However, for Marxian economics all commercial cargo vessels are commodity ships.

In socialism, wealth will not take the form of commodities as it will not be produced for sale but directly for use, both by other workplaces to produce their product and by individuals to use and consume. Ships will still transport natural resources and agricultural products from the part of the world where they were extracted or grown to another part where they will be used but they won’t be commodity ships, just tankers and bulk carriers.

Dr. Sweezy on Marx’s theories (1947)

Book Review from the September 1947 issue of the Socialist Standard

When the late Lord Keynes wrote his General Theory of Employment Interest and Money it was hailed in certain quarters as a step towards Marx in its method of analysis in respect of the problems of present day society. His conclusions revealed, however, that so far as any realistic evaluation of the nature of contemporary Capitalism was concerned, he had taken two steps away from Marxism. Undoubtedly a renewed interest in Marx’s economic teachings has been stimulated by the recent development of Capitalism and certain economists going further than Keynes have attempted to reconcile their own academic teachings with the objective analysis of Capitalist Society carried out by Marx in the middle of the last century. The results we need hardly say have been barren and, at times, ludicrous. To students of Marx, therefore, any book which sets out to present his doctrines in the light of modern capitalist evolution is of interest. Dr. Sweezy, a Harvard economist, attempts this and in some respects succeeds in his book The Theory of Capitalist Development, although in others he overwhelmingly fails.

His opening chapter on the methodology of Marx is interesting; methodology being another name for scientific method or the mode of investigation by which systematised knowledge is acquired. This involves the great importance of the process of “abstraction” which is essential to scientific method. A process which, as Sweezy says, “constitutes the method of successive approximation, or moving from the more abstract to the more concrete in a step by step fashion.” To put it another way, it is a question of going from the simple to the complex. When analysing a complex situation one must at the outset eliminate anything that is extraneous and likely to complicate the issue. To use a scientific axiom: to understand is to omit. Thus to understand the essential it is necessary to exclude what is non-essential for the purpose of the immediate investigation. A single example will illustrate our meaning. By the process of abstraction we can recognise the identical elements denoted by the objects, man, horse, bird, fish, etc., and combine them into a general concept—”vertebrate.” Thus we have the perception of a common property or identity of structure, which exists independently of their differences. To use scientific terminology, in order to arrive at this underlying relationship which exists between these different forms of life, they must be treated as an isolated process. In passing to a more detailed account, however, of the actual physical structures peculiar to their kind, factors which were arbitrarily eliminated as non-essential for the purpose of the crucial investigation, must now enter into consideration. The broad classification, vertebrate, now comes to acquire a more qualified and limited connotation the more it is brought into conformity with the totality of the various species, concretely considered. The validity of the use of abstraction is then: does it assist in helping to discover the essential relationship connecting the phenomena under investigation? That is its ultimate justification.

The same scientific principle holds good in Marxism. Marx began his analysis of capitalism by treating it as an isolated process of simple commodity relationships between capitalist and worker in which complicating factors like differences in the organic composition of capital, foreign trade, export of capital, non-capitalist regions, were deliberately excluded. Volume I of Capital can then be said to be the first stage of abstraction. Of course in capitalist society, considered from its concrete totality, commodities do not sell at their value. That socially necessary labour —the basis of value—is not a constant but ever-changing quantity. That monopolistic practices and imperfect competition distort the pattern of exchange relations, and so on. All this might seem to imply that Marx was going away from the actual conditions prevailing in capitalism but as every scientific thinker knows, scientific analysis rigorously demands such a procedure if the set of events under analysis is to be provided with an efficient cause for their happening. When ignoramuses like Schumpeter and Alexander Gray, whose books on Marxism have been recently reviewed in these columns, scream with the rest of their academic brethren about the so-called contradictions between the various volumes of Marx, they fail to see that such apparent contradictions are an integral part of the scientific method. They imply no more than various stages of abstraction for the purpose of analysing more clearly the problems of the present social system and so arriving at a thorough and comprehensive knowledge of the social forces underlying it. This is our interpretation of the guts of Sweezy’s opening chapter. There is nothing original in this explanation of Marx’s economic methodology but the author elucidates it clearly and lucidly.

Chapter 2 on Value is also instructive, the author dealing with the more abstract side of Marx’s value principle the qualitative aspect. Undoubtedly the opening chapter of Marx’s Capital volume I, has been the least understood by his critics. It was here that Marx sought to demonstrate that any theory of value to be scientifically valid must discover a homogeneous quantity which although itself no? value was nevertheless able to provide the terms by which the exchange value of commodities could be expressed. It was here that Marx’s abstract undifferentiated labour or the expenditure under socially determined conditions of production provided the clue. Thus although labour is not value itself, it constitutes nevertheless the substance of value and so enables the different kinds of concrete labour—use values—to be reduced to this element common to them all. By being made qualitatively equal they can thus be rendered quantitatively comparable as exchange values. It was Marx’s separation of labour-power and labour—his major contribution to political economy—that enabled him to elucidate his theory of value much more cogently and comprehensively than his classical predecessors, Smith and Ricardo. Marx showed that labour-power was a commodity whose value was determined like all other commodities by the amount of social labour necessary for its production and reproduction. Labour, on the other hand, was a definite expenditure of human productive activity and thus capable of objective quantitative measurement and so as a value principle is independent of mere price fluctuations. The fact that abstract materialised labour takes a commodity form is the outcome of historically conditioned social relationship of commodity owners (including, of course, buyers and sellers of labour-power). Value itself is then a social quality, quantitatively expressed in exchange value. It can be seen then, the decisive and revolutionary break Marx made from the classical economists, Adam Smith and Ricardo, who merely treated value from its quantitative side—Exchange Value.

Sweezy also discusses Marx’s Law of the tendency of the falling rate of profit. The rate of profit must not be confused with the rate of surplus value. Thus if the organic composition of capital is £9,000 constant and £1,000 variable and the rate of exploitation of the workers employed by the variable capital is 100 per cent, then the surplus value produced by the workers will be £1,000. The capitalist, however, computes his profit on the total outlay of his capital, thus the rate of profit is “surplus” divided by “constant” plus “variable” which is 10 per cent. With every increase in the ratio of constant to variable capital the rate of profit falls even if the rate of exploitation remains the same. The author does not, it seems, accept the tendency of the rate of profit to fall due to the rising organic composition of capital but seeks to show that accumulation of capital with its increasing demand for labour-power tends to raise wages, and by so reducing the amount of surplus value bring about a fall in the rate of profit. Only when the capitalists strive through the introduction of labour-saving machinery to maintain the rate of profit or to raise its former level does the rising organic composition of capital come into the picture (page 105). It is true that as accumulation expands the supply of available labour power in the market will approach exhaustion point and the price of labour power will tend to rise, at least in certain industries and among certain workers. Fresh capital, meeting less and less reserves of cheap labour power will also tend to go increasingly into constant capital (labour saving machinery, etc.), and the organic composition of capital will be raised. Nevertheless this change is dictated by the relative scarcity of labour power and it does not follow that alteration in the organic composition of capital is necessarily offset by a proportional increase in the rate of exploitation. In this case a rising organic composition of capital is associated with a fall in the rate of profit. Moreover, as Marx points out,

“Two labourers, each working 12 hours daily, cannot produce the same mass of surplus-value as 24 labourers working only 2 hours even if they could live on air and did not have to work for themselves at all. In this respect the compensation of the reduction in the number of labourers by means of an intensification of exploitation has certain impassable limits. It may, for this reason, check the fall of the rate of profit but cannot prevent it entirely.” (Capital, Vol. 3, page 290, Kerr edition)

It is true that cheapening of the elements of constant capital, increase of relative surplus value and relative overpopulation are counteracting tendencies against the decline in the rate of profit. It has been often said that Marx’s analysis gives no clear indication of which set of tendencies would prevail (although Marx himself appeared inclined to the view that a fall in the rate of profit would be associated with continued capitalist expansion and increased technical changes.) Marx, however, was the last person to deduce a falling rate of profit in a vacuum. That would have been foreign to his own scientific and historical approach. For him the dynamics of capitalist society and the interaction of the totality of class relations and interests was the dominant feature in shaping economic trends. And there the matter must rest.

The author renders a good account of the general nature of capitalist crises although his own treatment on certain aspects of the matter must be read with circumspection. Sweezy enumerates two types of crises, one associated with the falling rate of profit and the other that he terms realisation crises, i.e., the inability of the capitalist to sell commodities at profitable prices. This last type of crisis emphasises what Sweezy calls the underconsumptionist tendencies inherent in capitalism. This “underconsumptionist ” approach seems, however, an unsatisfactory formulation of the treatment of crises. It is true that under the stimulus of capitalist accumulation the productive forces will expand and this will tend to higher wages. Nevertheless wage levels are always in the final analysis regulated by the desire of the capitalist class to maintain the customary rate of profit on their capital outlay. Moreover, as the result of the increased productivity of the worker arising out of the expansion of the productive forces, the ratio between the value of his labour power and the value of the wealth he produces is further increased, higher wages notwithstanding. His own share of the total product suffers then a relative decline. With a greater amount of surplus value in the hands of the capitalists there is a tendency for increasing investments in the means of production. Thus the expanding forces of production come into conflict with the limited consuming power based on the antagonistic character of class income distribution inherent in capitalism. To call this underconsumption is, however, to strain the meaning of the term in popular economic usage. Again this underconsumptionist aspect is merely an inevitable corollary of a more fundamental feature that is the basic conflict between the powers of production and the productive relations of capitalist society. As Marx points out,

“It is not a fact that too much wealth is produced. But it is true that there is periodical over-production of wealth in its capitalist and self-contradictory form. . . The capitalist mode of production, for this reason, meets with barriers at a certain scale of production which would be inadequate under different conditions. It comes to a standstill at a point determined by the production and realisation of profit not by the satisfaction of social needs.” (Capital, Vol. 3, page 303, Kerr edition).

Or, again, “the real barrier of capitalist production is capital itself.” (Page 293, same work).

Again Sweezy’s view that crises arise due to a shortage of labour-power which forces wages up and consequently causes the rate of profit to decline is hardly Marx’s view of the matter. In Vol. I of Capital on The General Law of Capitalist Accumulation Marx repeatedly stresses the fact that demand for labour-power does not keep step with the expansion of capital. In other words owing to the rising organic composition of capital the variable portion does not, as a means of the employment of wage-labour, keep pace with increases in the working population. Marx, of course, does not deny that the possibility of crises can arise from “labour shortage,” especially in early capitalism (page 700, Capital, Vol. I, Modern Library edition). Just as the present shortage of workers today carries distinct crisis implications. Nevertheless the appearance and growth of a surplus industrial army he held was the chief feature in the general law of capitalist accumulation. To sum up, Marx’s writings do not indicate two separate features of crises but rather that the possibilities of crises and crises themselves are indissolubly linked with the basic contradictions inherent in present day class society It is these contradictions which give to crisis under capitalism its familiar periodic character.

The chapter which criticises breakdown theories is excellent. The author shows that no such theory of final capitalist catastrophe can be logically deduced from Marx’s writings. Rosa Luxemburg, Otto Bauer and Grossman are all acutely criticised for their formulation of breakdown theories. Our own pamphlet, Why Capitalism Will Not Collapse (written during the last crisis) was a valuable contribution in showing why crises as such do not bring an end to capitalism, in answer to the spokesmen of various political parties, Communist Party included, who were noisily proclaiming the 1931 slump as the beginning of the end of the present economy.

For reasons of space we cannot adequately deal with Sweezy’s mathematical treatment of the transformation of value into prices of production for the purpose of maintaining equilibrium conditions between industries that produce means of production and those that produce means of consumption.

But surely the essence of the matter lies in the historical treatment of the development from simple commodity production to a developed capitalist economy. In simple commodity production constant capital plays little part and is, therefore, relatively unimportant. Here the law of value is directly controlling the exchange relationships. In modern capitalism different organic compositions of capitals bulk large. Seeing, however, that only the variable portion (the part employing wage labour) produces surplus value then different units of capital according to their organic composition will produce different quantities of surplus value and consequently different rates of profit. The capitalist, however, is indifferent to the ratio of means of production to variable capital and seeks the customary rate of profit on his total capital outlay. How this is brought about is due to the competition for spheres of investment in different industries, capital leaving those industries whose rate of profit is low and invading and expanding those industries where the rate of profit is high and where, as the result of this expansion, prices fall and with them the rate of profit. By this incessant competition for various spheres of profitable investment an equalisation of profit or an average rate of profit is brought about. Thus the price at which capitalists sell their goods oscillates not round their value but the price of production, i.e., the cost of production plus the average rate of profit. Nevertheless the sum of the prices of production at which commodities are produced equals their total values. Again this process does not alter the sum total of surplus value produced b the workers, the only point is its distribution according to the requirements of a profit motive economy which necessitates an equal share on a given expenditure of capital. Under developed capitalism the law of value is indirectly controlling exchange relationships, nevertheless, it must constitute the starting point of investigation for elucidating the phenomena of production prices peculiar to capitalism. This modification of value into production prices is then the result of a long drawn-out historical process and a mathematical treatment of it from the unhistorical point of view of equilibrium conditions has little significance, as Sweezy admits (page 128), “the law of value can he discovered and analysed in principle by the use of either value calculation or price calculation.”

His last chapter, “The Decline of World Capitalism” is unadulterated rubbish. He mistakenly holds the view that the world is split into two separate social systems, i.e., Socialism in Russia and Capitalism elsewhere whose fount is the U.S.A. He further holds that the social system of Russia coupled with its growth elsewhere will exercise a disintegrating effect on capitalism. Great Britain and Western Europe — presumably on the Soviet model—might go socialist at the end of the war (this book being first published in America in 1942). Bit by bit Socialism would undermine the stability and structure of Capitalism in perhaps a peaceful fashion. Thus the Fabian principle of peaceful permeation is elevated to international status. Apart from the theoretical falsification of the real issue Sweezy’s idea of “a peaceful era” following the war has been hopelessly falsified by the inter-imperialist rivalries of the great capitalist powers, U.S.A., Britain, France and Russia.

Nevertheless sections of the book provide a useful source for the better understanding of the theoretical foundations of Marxism and its application to the social problems of our time.

Ted Wilmott

Analysis of Wealth. II. Surplus Value. (1916)

From the July 1916 issue of the Socialist Standard

Link to Part 1.

In a former article under this heading the writer tried to show that the substance of value, the common property of all commodities as such, is social labour, measured by the time taken in its expenditure. He tried to show further that money serves as a measure of values, a standard of prices, and a medium of circulation, only because it is itself a commodity, that is to say, it embodies social labour in the same manner as do the articles for which it is exchanged. He tried to show still further that the production of commodities, i.e., articles for exchange, and the use of money are features of a certain stage of development in the means and methods of production and in the control thereof, and are destined to disappear with future progress.

We have now to consider money a little further in the form of capital in the process of accumulation, or in other words, the phenomenon of “money making money.” For money in itself is not necessarily capital. Only when it is used for the purpose of adding to itself does it become so. When the independent producer (peasant or handicraftsman) brought his goods to market he received for them a certain sum of money which sooner or later he expended on articles of a different sort, largely for his own personal use and partly, of course, to buy fresh raw material, etc. To him the money entering transiently into his possession was not capital. Nor were the goods he sold, for he received in exchange goods of equal value. No interest, no profit, accrued to him in the transaction.

Otherwise is it with the modern capitalist with a sum of money, which is constantly expanding in volume. He buys commodities not for consumption by himself, but in order that in some form or other he may re-sell these commodities and realise a profit on the transaction. Apart from this profit his activities as a capitalist would be meaningless.

The independent producer bought commodities mainly in order to realise their use-value in his own person. The capitalist buys them only to throw them back into circulation and receive in return an increase in exchange-value. The simplest definition of capital, then, is money thrown into circulation only to be received back again with an increase to itself, which increase becomes part of the capital which is again advanced to return with a fresh increase.

This increase or profit Marx calls surplus-value. The problem of its origin is the central one in economic science, and its solution holds the key to an understanding of all the workings of capitalism.

The quest for profit is the mainspring of the present social order. Let us take the mainspring out of the case and examine it.

In the first place, it is obvious that money must go into circulation in order to increase itself. If it simply lay in a safe it would remain the same in quantity. Thus is the modern capitalist cuter than the old-fashioned miser. Being a “true Christian” he refrains from the stupid, worthless process of hugging his money to himself, and lets it go believing implicitly in the words of his Lord : “Whosoever would save his life the same shall lose it, but whosoever loseth his life for my sake [“profits’] the same shall find it.” But bearing in mind that on the average prices are determined by values, and these latter by the socially necessary labour embodied in commodities, it is also clear that the circulation of money cannot in itself give rise to profit. On the average the capitalist buys commodities at their values and sells them again at their values. He exchanges equivalents, and unless some increase of value takes place between the two acts of buying and selling he can realise no profit. Various orthodox theories have tried to see the origin of surplus value in the process of exchange. The investigation of these theories, however, shows them to be based either upon the confusion of use-value with exchange-value or upon the illusion that prices (and implicitly values) are determined by the arbitrary will of the owner of commodities or by mere chance.

In dealing with capital the scientific economist is concerned not with an accumulation of use-values, but of exchange-value in the form of money ; which accumulation, moreover, is not made by one or a few capitalists at the expense of the rest, but by the capitalist class as a whole. The origin of surplus-value is, therefore, to be found in production, or in other words, in the productive consumption of the commodities originally purchased.

All commodities which are consumed in order to re-appear as new commodities may be said to be productively consumed. For instance, leather purchased by a boot manufacturer is consumed in the factory to reappear as boots. The boots, moreover, contain more value than the leather, since they embody additional labour. This additional value, however, is by no means necessarily surplus-value. Imagine, for instance, an independent boot-maker purchasing his own tools and raw materials and selling his own product. The value of the raw materials, etc., is transmitted to the finished product, which, in addition, contains the value added by the bootmaker’s labour. The boots are sold for more money than was paid for the leather and the tools, but no surplus-value has been realised ; money does not in this instance make money. The raw materials, etc., do not transmit more value than they themselves contain ; all the increase is due to the boot-maker’s labour. The difference between the original outlay and the price he gets for his commodity is simply equal to the value he has added. The effect is the same as if he had made no outlay but produced a new and distinct commodity and sold it. His money has not expanded itself ; he has simply added to it. In short, it is not capital. Men do not become capitalists and wealthy in the modern sense by themselves adding value to natural objects. Rather, the increase of their wealth is obviously independent of their efforts and totally out of proportion to any they might make.

Nevertheless, seeing that all value is but the embodiment of labour, surplus-value, being a particular form of value, can only be derived from labouring in some fashion. Therefore in order to obtain surplus-value the capitalist must find in the market not merely ordinary commodities (which are in capable of producing for him more value than they themselves possess) but some commodity which actually produces value, i.e., labours. This commodity he finds in the energies of the modern wage-labourer. It matters little to the capitalist what other commodities he deals in. Food or clothing, luxuries or necessities, all alike embody labour, therefore it is the labouring commodity which he essentially requires in order to obtain profit.

When the capitalist purchases other commodities he buys congealed labour : labour which is past, dead, inactive. From them alone he can expect no increase of value. In buying labour-power, however, he secures the potential source of all further value. So far as he is concerned the special function of labour-power is to produce value and, above all, surplus-value. With the usefulness of labour-power, in any other sense he is not concerned, any more than he is concerned with the utility of the goods he sells. Capital being but a sum of exchange-values, its sole passion is for its own growth by the production of more exchange-value, which means the continual consumption of labour-power. It remains to show how by this consumption surplus-value is actually produced.

Labour-power, like every other commodity, possess an exchange-value, which is realised in a price, termed wages. The amount of this exchange-value is determined by the labour-time spent in its production. The average wages of any section of the working class depends upon the cost of its customary necessities of life, including such special education as may be necessary in the branch of industry in which it is employed. It is obvious that wages cannot be long depressed below this standard without impairing the productive efficiency of the labourers’ energies. On the other hand, if they rise far above this standard the surplus-value is encroached upon. For surplus-value is nothing more than the difference between the wages of the labourers and the sum total value of their product. Were the labourers in the habit of producing no more wealth than would keep them, in working condition surplus-value would be impossible. The labour market, like the market for other commodities, is liable to fluctuations, but experience shows that these cancel one another, and that the general level of wages is such as will maintain the workers in their daily tasks.

But though the price of labour-power is limited in this way, the limit of surplus-value is simply the productivity of labour-power. Anyone purchasing a conmodity acquires the use of it, and the capitalist only buys labour-power in order that he may use it up, i.e., set it to produce the greatest possible amount of exchange-value in the form of commodities. Here we may take examples from Marx (“Capital,” Vol. I. p. 106).

Marx first supposes a capitalist advancing a sum of 15s. which is split up as follows : 10s, is the price of 10 lbs. of cotton ; 2s. represents the value of wear and tear of machinery, etc.; 3s. is paid for the hire of labour-power. We have thus a sum of 12s. as constant capital, i.e., value which passes unchanged into the form of the finished product, yarn. This is assumed to be the product of two days labour of twelve hours each, i.e., two hours labour is embodied in a sum of 1s., or a commodity of that value. Supposing now that in six hours the 10 lbs of cotton are converted into 10 lbs of yarn, The yarn contains thirty hours labour ; twenty-four being spent in producing raw material, etc., and six in converting it into finished product. Its value,, therefore, is 15s., i.e., 1s.for every two hours labour.

Here no surplus-value is created, for 15s. was the sum originally advanced. By only working six hours the labourer has done no more than produce an equivalent of his wages, 3s., and the capitalist makes no profit.

Marx now gives a second case. In this the capitalist advances 27s. Twenty lbs. of cotton are bought for 20s., and 4s. is allowed for wear and tear. The labourer is paid his wages of 3s., but instead of working only six hours is made to work twelve, having exactly twice the amount of raw material to convert into yarn. This time the yarn represents 60 hours labour, 48 being contained in raw material and twelve being added in the process of spinning. If 30 hours labour are represented by 15s., then 60 hours are embodied in 30s.

The capital advanced was 27s., so that the capitalist makes a profit of 3s. when selling the goods in the market at their value.

These simple examples illustrate the whole character of capitalist production. Carried on as it may be with all due regard to legal forms, it yet consists of a process of robbery disguised by the exchange of equal values.

The capitalist certainly gives the labourer his “due,” i.e., the value of his energies, or in other words, the cost of production of his commodity labour-power, but if the labourer simply replaced this value the capitalist would gain nothing. For him the transaction is meaningless unless the worker produces far more than that, unless, in fact, his whole life-time becomes but a process of producing value.

In further articles the writer hopes to outline how capital in its lust for self-expansion pushes the exhaustion of labour-power to its limits. For the present it is as well to remember the cause of the subjection of labour-power to capital.

The worker sells himself (in the form of his energies) as a commodity. Why ? His obvious motive is to obtain his price, wages. These as we see, however, only represent sufficient to keep him in existence. It follows, then, that he lacks the means of subsistence and must purchase them, which still further implies that he does not possess the wherewithal to produce them. This is another point to be dealt with later.

Eric Boden

[To be continued.]

Analysis of Wealth. I. Value. (1916)

From the June 1916 issue of the Socialist Standard

Although from time immemorial the mass of objects which we term wealth has formed the basis of humanity’s existence, it is only of recent years that a scientific investigation of the conditions of its production and distribution has arisen. This is indicative of a development of these conditions, for if there was in the past a lack of effort to solve economic problems, this can only be because these problems existed, if at all, in an obscure, immature fashion. In the days when small local communities were practically self-supporting and articles only rarely exchanged on their borders, it was obvious enough that wealth was the direct product of labour for individual consumption. Likewise in the earlier stages of production for exchange the seller of commodities knew them to be his personal products and attached no miraculous import to the money for which he sold them and with which he purchased the products of men likewise known to him. With the complexity of full-blown capitalism, however, the workers become separated from the commodities produced by them, which acquire a mysterious knack of realising more in their sale than what was laid out in buying the necessary factors for their production. Henceforth wealth seems to spring from nowhere—money makes money; and problems present themselves for solution.

Founded upon the very conditions which give rise to the problems, however, is the power of the capitalist class, who have a pretty sure instinct that a real economic science is inimical to their interests since it unavoidably exposes their parasitical position in society. It can readily be understood, therefore, that prior to critical revolutionists like Karl Marx developing the science in working-class interests, only a few isolated truths were revealed by the studies of honest, if orthodox, inquirers likewise few in number ; while the mass of so-called economic literature became of an apologetic character seeking to obscure, in capitalist interests, the very problems it pretended to elucidate.

Members of the working class, having nothing to fear from criticism of a social order which entails nothing but poverty for them, may find in the writings of Marx a clear, if elaborate, analysis of the facts of their existence. Time spent in their study, snatched though it be from scanty leisure, is repaid by the acquisition of an undying purpose in life and the joy of knowledge with which to carve the road to power. If in the following paragraphs the writer can outline the main points of Marx’s economic theory in such a way as to arouse interest in some hitherto apathetic or hostile mind, his immediate object will be served. If the inquirer be worth his salt he will not rest till he is intellectually equipped for the conflict with capital.

The unit of modern wealth is the commodity, which has three essential features. Firstly it must satisfy some human want ; be useful. Secondly it is a product of human labour, a conscious adaptation of nature ; while lastly it must be exchangeable for other useful labour products. It must find its way into the social market else it is no commodity.

Thus a commodity is a combination in an object of utility and exchangeability, or in other words, of use-value and exchange-value. The former is due to its natural qualities (physical, chemical, etc.,) and also distinguishes it from any other commodity. It is this difference in usefulness which leads to the exchange of commodities, although it by no means determines the ratio in which they are exchanged. Any given commodity vendor does not exchange, say, boots for boots, but for some article of wealth which has different properties. On the other hand it would be absurd to say that boots are as useful to him as the commodity he receives in exchange. Any attempts, therefore, (and there have been many), to explain exchange-value through utility are futile. Exchange-value is a relation of equality, while a comparison of the use-values of commodities simply reveals their differences or inequalities. What, then, is exchange-value ? If we take a pair of boots and a ton of coal, each selling say for £1, we have three commodities (including the sovereign) of equal value. Compare as we may their relative weight, colour, smell, size, or any other tangible property, we can discover no equality between them. Their uses are different and it is highly improbable that the relations of supply and demand in coal and boot markets respectively are identical at any given moment. We are thus left with only one feature common to all these commodities, viz., they are products of human labour, they embody human energy. In this respect they may be compared and an equation between them arrived at if we measure the energy embodied in them by the time occupied in its expenditure. If, then, our imaginary pair of boots and ton of coal are equal in value, it can only be because they contain equal quantities of labour or. in other words, have taken an equal length of time to produce.

It is important to remember here that commodities are social products and presuppose the division of labour in society. Producers of coal and boots or of any other special product cannot exist on their commodities alone ; they exchange as a matter of necessity. In consequence they seek to minimise the length of time taken in producing any given commodity in order, by the cheapness thereof, to secure a certain sale. If, therefore, someone takes up unnecessary time in the production of a commodity its value in exchange ia not enhanced thereby. It is the socially necessary labour-time alone which forms value.

Another result of the division of labour is the difference in quality of the forms of labour which produce different commodities. Certain occupations exhaust more nerve and muscle in a given time than others. Their products therefore contain more value in proportion to the intensity of labour in excess of that embodied in other commodities. This, however, by no means affects the fact that they are reducible to one common element, simple labour-power ; the more intense or skilled labour simply counts as a multiple of ordinary labour. Labour remains the factor which determines value.

This fact in the key to the door of economic mystery. Ignoring this, the professional “political economists” have endeavoured to lead us down one blind alley after another, beguiling us the while with romantic yarns concerning the awesome and unapproachable majesty of Money arrayed as Capital, embodiment of all the attributes of God, before whom the knees of men must bow for ever. Let us try to use the key and enter the holy presence. Mayhap ’tis a gilded skeleton, after all with which they would scare us.

Value (by which we continue to mean exchange-value) does not exist apart from material, valuable objects, any more than weight exists apart from things which are heavy, or heat apart from hot things. In measuring or expressing the value of a commodity we are, therefore, compelled to use some other commodity as an equivalent.

In common practice we use gold and say, for instance, 1 pr. of boots is worth 1 sovereign ; but if 1 ton of coal is also worth £1, then we might just as well say, 1 pr. of boots is worth 1 ton of coal or any other commodity which exchanges for £1. £1 serves as an expression of the value of the boots only because, like the boots (and the coal), it contains a definite quantity of human labour, and is in this respect equal to them.

There is, therefore, nothing mystical about the function of gold as money more than there is about the use of mercury as a measure of heat, or iron weights in a greengrocer’s shop. Gold measures value only because itself is valuable, as mercury has a temperature and iron is heavy. As coin gold becomes symbolic and may be replaced by tokens bearing a nominal value only, but said tokens must not diverge in nominal value from the real value of the gold which would otherwise be used. Likewise the amount of depreciation in weight and therefore value which a gold coin is allowed to suffer and yet remain in circulation, is limited by law.

The quantity of gold for which a commodity will exchange we term its price. This price is broadly determined by the commodity’s value, which is liable to fluctuations as the time taken in production varies.

The price, however, does not only reflect these variations. The velocity with which it is disturbed from time to time carries it now above, anon below the actual value of the commodity. On the surface these minor disturbances appear to be caused by supply and demand, and this is indeed so ; but the relations of supply and demand are themselves subject to the changes in labour-time. Assume, for instance, that the time occupied in producing a given quantity of boots is decreased by some new invention or pro­cess, then there will be a tendency to increase the output beyond the power of the market to immediately absorb, followed by a fall in price. The excess of boots remaining unsaleable, pro­duction is restricted till prices rise, probably above the new value, afterwards falling to approximately the correct level, when production, is resumed. The process may be compared with the oscillations produced on a pair of balances when the weight on one side is disturbed. Owing, however, to the continual alteration in the values of commodities due to improved methods of production, prices hardly ever come to rest at an exact coincidence with value. Nevertheless, it must be an approximation of price to value that takes place, for money is under the same necessity to express its value in the form of other commodities as these commodities are to express their value in the form of money. The state­ment that a sovereign is always worth a sovereign teaches us nothing.

Gold as money, then, is a transformed commo­dity. In addition to its own use (mainly luxurious) it has acquired the functions of universal equivalent—equivalent for all other commodities. Alone of all of them it is directly exchangeable for any of them by reason of its fitness to serve at once as a measure of value and a means of exchange or medium of circula­tion. Like all other commodities, it originates in a form of division of labour in which the means of production are private property and the product also; in which, moreover, production is not for direct use but for exchange.

The self-supporting peasant family of the Middle Ages had little use for money. Its various products were consumed by itself. The labour of each member was obviously part of the family’s labour. Consequently products were not exchanged within it but were considered the family property. Long ages before civilisa­tion tribal mankind produced forms of wealth which were used without going through the process of private exchange. They too needed not money.

The existing order of society, in which goods are produced for the market, is not immortal. It has not always existed ; nor will it continue for ever to exist. When the vast means for producing wealth have been converted from private into common property ; when the labour of society becomes consciously organised and its products distributed directly for consumption ; when, in short, Socialism has been established, money will disappear. Labour products will cease to be commodities. Their social character will be obvious at first sight and will need no translation into mystical terms of gold.

As it is at present, when we express the values of commodities, we do but state in a round-about way that they are products of so much social labour, in a word, our products. Money conceals the fact but does not alter it. It is itself a social product which has the power to command social labour. Accumulated in the hands of private individuals it enables them to exploit masses of their fellow men, in short, it becomes capital. Precisely how it does this will form the subject matter of a future article.

Eric Boden

[To be continued.]

Cooking the Books: Einstein got it right (2025)

The Cooking the Books column from the January 2025 issue of the Socialist Standard

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.

The Economics of Capitalism (1977)

From the July 1977 issue of the Socialist Standard

The commodity is the cell form of capitalist society. It contains the social substance which is described as human labour. This gives it Value. The amount of human labour is not measured over single commodities or groups of them, and this is not possible. The commodity is a social product, and the substance of Value is social: one uniform, or homogeneous, labour-power embodied in the sum total of the values of all commodities produced by that society under normal conditions of production.

Individuals or groups produce commodities, but not the Value of commodities. Society determines the Value of a commodity, and the Exchange-Value of a commodity, through the process of determining the amount of socially-necessary labour involved in their production, i.e. the labour-time socially necessary for their production.

The Value of commodities will fluctuate according to the productiveness of social labour at any given time. It is not fixed or intrinsic. The law of Value lies behind every exchange of products, but the exchange relation is a relation between products. Human labour-power creates Value but is not in itself Value unless it is congealed or embodied in objects of Value, which can be used to express the Value of other objects of Value.

The social relation of Value comes into being at that point in social production when Use-Values are produced for the purpose of exchange, and this form has become dominant. Value is inseparable from its magnitude, and the social relation is basically an exchange relation. Exchange-Value has no existence separate from Use-Value (but Use-Value can exist without Exchange Value). The productive relations of men in a Socialist society will result in the production of Use-Values, articles of utility specifically produced for consumption and not exchange. The social relation of production will be a direct relation between individuals consciously producing for each other and not producing for an anonymous market. The social powers of production will also be under the direct control of society. The point is that there will be relations between people manifesting themselves as relations between things.

Obviously this description of Value cannot stand on its own, and requires explanation. The Marxist position is that labour-power has a two-fold character: on one hand it produces articles of utility, and at the same time it produces Value; that is, concrete labour becomes the form under which its opposite abstract labour manifests itself.

1. The substance of Value.
2. The magnitude of Value.

The twofold character of labour power cannot exist in a Socialist society — the subjects of labour will not come into the Exchange relation because wealth will not assume the commodity form.

We have always stressed the need to abolish production for exchange, together with the monetary system which is the highest manifestation of the Value relation. In doing this we have always pointed out that men stand behind all forms of social production and distribution, and that wealth need not take the commodity form. We claim, with Marx, that when the products of labour are brought into the exchange relation of Value we are equating the different kinds of labour embodied in them. We are, in effect, exchanging one man’s labour for another man’s labour, and that all commodities, as social products, are the material expressions of the human labour spent in their production. To endow inanimate objects such as commodities with powers outside of the human agency is absolute nonsense.

The historical development of Value as a social relation is completed when the amount of labour spent in the production of useful articles is socially expressed as a quality belonging to the article. In section III of Capital on commodities, Marx makes the following statement: 

“If however we bear in mind that the Value of commodities has a purely social reality, and that they assume this reality only insofar as they are expressions or embodiments of one identical substance, viz. human labour, it follows as a matter of course that Value can only manifest itself in the social relation of commodity to commodity.” 

Capitalism has separated persons from their products, and the social relation of Value is a monetary relation between things of Value.

Marx was always concerned to separate the discussion of political economy from philosophical propositions, although inevitably there is some overlap. To this extent he was concerned with the social relations between things. “The relations of the producer to the sum total of their own labour is presented to them as a social relation existing not between themselves but between the products of their labour” (Capital, Vol. I, p.85, Kerr edn.) Exchange establishes the direct link between the products, and indirectly through them, the producers. “The relation connecting the labour of one individual with that of the rest appears not as direct social relations between individuals at work, but what they really are, material relations between persons, and social relations between things”, (p. 78, Lawrence & Wishart edn.)

One thing emerges, and that is that Marx considered that social relations existed between things. Any investigation of capitalist society would have been impossible had he taken any other view. Marx obviously knew that human labour stood behind all production in all stages of society. It was only through the analysis of prices that the Value relation was discovered.

Jim D'Arcy

A fair day’s pay for a fair day’s work? (2024)

From the April 2024 issue of the Socialist Standard

The expectation, within an exchange economy like capitalism, is that products and services are exchanged in a like-for-like measure of value. The money you pay for anything is a contract of exchange based on the promise of equal value. Your money is a universal commodity that legally ensures this and, for the most part, it will be a reality of economic activity. Although universally accepted this description of a transaction makes a rather naive assumption about the nature and definition of ‘value’.

Economists have long pondered on this phenomenon and continue to disagree as to its nature and even its efficacy in describing financial activity. There are deep ideological reasons for the attempt to divide the disciplines of politics and economics but anyone genuinely seeking to understand the history of this most basic, and important, social activity will quickly discover the impossibility of doing so.

The defenders of capitalism will go to great lengths to try and prove that the system has coherence, equality and fairness built into its transactional process so that any hint of irrational and exploitative elements will be described as originating in ‘ideological extremism’ or be completely ignored. Such is the grip of this economic propaganda that very few are willing to concede the possibility of the establishment of a non-exchange economy called socialism.

Consider the meaning and implications of the title of this article in the light of what socialists believe to be the most glaring example of an irrational and unequal economic exchange within the capitalist system – the exchange of labour for wages. We have all heard the phrase: ‘He knows the price of everything and the value of nothing’. This hints at both an economic suspicion and a moral criticism of the system based on a notion that price and value are not the same thing. As described above we usually experience an assumed parity of value when we buy anything and, despite the vagaries of supply and demand, this is indeed the case. But if we describe wages/salaries as the price of labour power we see immediately a disparity of value that this represents in terms of the value produced and the profits enjoyed by non-producers.

The only possible conclusion is that wages do not represent the full value of what a worker produces – if it did there would be no profit and no capitalism. Labour power is the only commodity that can produce more value than is represented by its price (wages). If this is a correct analysis it condemns the capitalist system as one of exploitation and theft which is why, as mentioned above, those who defend the system could never acknowledge this obvious truth and go to such great lengths to obfuscate it in their tortuous economic theories.

This doesn’t imply a massive conspiracy theory against the truth but merely a profound ignorance of the reality of economic activity. How has this come about? Socialists contend that it is because of the confusion and misunderstanding of the relationship between price and use-value. To try and untangle this we have to go back and understand the concept of value.

It is a fascinating study to understand what different societies in different times have considered valuable. Other than human qualities like intelligence, courage, moral integrity and compassion we have attributed value to objects of our and nature’s creation such as gold, silver, gem stones, art, music, antiques, etc. Phenomena of great utility like oil, gas, water, metals and wood have enjoyed varied levels of prestige through the ages but one thing above all others has been valued the most – social status through the accumulation of wealth together with the political power it generates.

To overcome the impracticalities of direct exchange via barter one item of wealth ultimately evolved into currency (money), something that could be exchanged for anything else. As trade expanded it became necessary to produce such coins in a universally acknowledged medium of value such as gold or silver which was in turn superseded by a legal attachment to these material incarnations of value and then merely to the prestige and power of the state (fiat money). But at the root of all of these commodities is human labour. Gold and oil are not valuable because they are rare but because of the labour-time needed in finding and extracting them (due to their rarity).

The price of the labour power expended to do this is determined by the amount of labour needed to create (training, etc) and maintain it (means of life/standard of living). But the price paid for labour power is always much less than the price paid for the results of labour like gold and so on. Those who produce wealth only get in return the value incarnated in the price of their labour power (wages) and not the price incarnated in the value of what they produce.

Surplus value is the difference between the wealth represented by the wages of producers and the wealth generated by their labour. When the products of this labour are exchanged (sold) this magnitude of difference becomes profit – part of which can be resurrected as capital which is used to expand this whole cycle of exploitation over again and again. Capitalism depends on the fact that a day’s wages do not represent the value of a day’s work. No ‘redistribution’ of wealth can overcome this essential fact of capitalism. Exploitation occurs at the point of production and is immoral, irrational and a relic of the past. No form of exchange economy within an advanced technological culture is needed – indeed capitalism represents a fetter on production. It is a remnant of class inequality and has no shred of economic coherence or relevance for the 21st century.

Wez

The Economics of Capitalism - Part 2 (1954)

From the October 1954 issue of the Socialist Standard

(Continued from August issue)

The whole of the labour of society is engaged in producing the whole social product, but not in accordance with a predetermined social plan. Each producer works on his own account and does not know, until he tries to sell his product, whether or not he has kept in line with the average socially necessary labour criterion. If his product remains unsold he knows, too late, that he has failed. There is the further fact that society only requires commodities in appropriate proportions. For example, at a given time, there is a certain effective demand for bread, coats, and shoes, and labour employed in producing these commodities in excess of this demand is superfluous labour, and does not count in determining their values. As producers are working on their own account, producing commodities of different kinds with labour of different degrees of intensity, the common measure of value, that lies at the back of all kinds of skilled labour, is the labour that is the same in all human beings—just the expenditure of energy in its simplest form. The greater the skill involved in the work that is being done, the more of simple labour is compressed in an hour's employment of this labour, and the greater is the value produced in relation to what is produced by simple labour in the same time, even though the result may be a vastly increased product with a fall in the value of individual commodities.

The reduction of skilled labour to simple labour in the estimation of the value of a commodity is not done consciously by the producers but is accomplished behind their backs. An illustration may help to make this clear. If we turn back to the the early history of mankind, to conditions of barter when articles were exchanged against articles, those who were making the exchanges within the communities did so on the rough basis of the work involved in each article. The products were such that one man could have made any of them himself, if he had the time, but it was more convenient for him to exchange his surplus of one article for his neighbours surplus of another. If his neighbour asked what he considered too much for an article then he would make it himself. The products were so few that the members of the community knew the time that would be involved in the production of each of them. Now let us transfer the idea to the present time. All kinds of companies and the like are engaged in the production of a variety of commodities, commodities so dissimilar as bread and fur coats. Money is invested in the production of these commodities for the purpose of making a profit out of doing so, and money flows into the most profitable channels. This flow of investment increases the production of the more profitable commodities until it so far outstrips effective demand that the prices of them, and their profitability, is reduced. The flow of investment then forsakes the production of the commodities whose profit capacity has declined and moves into more profitable productions. This ebb and flow of investment ensures that, in the long run, all the commodities produced by society sell at prices that are round about their values.

Now let us go a little further into the question of prices. Over a period the price of an article goes up and down, and these ups and downs are caused by the rise and fall of demand; that is to say when supply exceeds demand prices are low, and when demand exceeds supply prices are high—the black market has been a sufficient indication of that fact. The average of these ups and downs is round about the actual value of a commodity. There are those who argue that it is supply and demand, and not the quantity of labour required to produce it, that determines the value of a commodity. They overlook the fact that in the alternations between supply exceeding demand and demand exceeding supply there must be a period when supply and demand are equal and therefore cancel each other out. During that period the supply and demand theory cannot be the answer to the question of the value of a commodity. No amount of mathematical manipulation can get over this hurdle. Supply and demand as an explanation of value must be ruled out. At best it can only explain the fluctuations in prices but not the point about which they fluctuate.

When commodities are being exchanged through the medium of money value is being; exchanged for value, but what really underlies the process is that the labour of one man or group of men is being exchanged, for the labour of another man or group of men; there has been a social division of labour. For instance the labour of housebuilding has been exchanged for the labour of shoemaking; and so on. Thus value is really a social relation; a relation between people, between one man’s labour and that of another; but this social relation between the labour of different people is expressed as a relation between the commodities they have produced; it is expressed when the latter appear on the market for sale. People have been producing articles for use all through history but they have only produced commodities, articles possessing value, where a system of exchange has come into operation. Further, it is only under a system of commodity production, the production of articles for the purpose of being exchanged, that value becomes one of the essential qualities of a product. As Marx puts it:

“Every product of labour is. in all states of society, a use-value; but it is only at a definite historical epoch in society's development that such a product becomes a commodity. viz. at the epoch when the labour spent upon the production of a useful article becomes expressed as one of the objective qualities of that article i.e., its value.”

Thus with the abolition of commodity production value will also disappear. Articles will no longer be looked upon as having so much value but will only be appreciated according to their usefulness for consumption or enjoyment, and diamonds and furs will lose a good deal of their attraction. At the same time the mysterious nature of commodities will disappear: the mystery of money arises out of the relation of the individual producers to the total of their own products which appears to them as a social relation between the objects they produce.

There is one aspect of commodities which, unless it is understood, will leave, room for confusion. Commodities are articles that are regularly produced for the market, therefore only those articles that are capable of constant reproduction are commodities. A genuine antique is not a commodity because it cannot be indefinitely reproduced; it is true it comes upon the market and is sold and thus, although not a commodity, takes on a commodity character. Likewise honour takes on a commodity character when politicians sell their votes. In the huge productive output of to-day these are die comparatively odd things.

Finally, the labour of private individuals becomes labour directly social in its form owing to the fact that production is for the market; individual labour becomes an indistinguishable part of the general social labour. It is impossible to tell by looking at products as they appear on the market, what different portions of the world's population have taken part in their production; the raw materials may have been produced in India, China or Russia, the machinery in England, France or Germany, and the finished products in America, Japan, or Holland. They appear on the markets, local, national, and international, just as articles for sale produced by a portion of the general labour of society.

Gilmac.

(To be continued.)

Commodity production (1985)

From the May 1985 issue of the Socialist Standard

Wealth, as the etymology of the word suggests, is what contributes to human welfare; it consists of material objects, or goods, which serve to satisfy some human need. The basic source of all wealth is nature since goods are either found in nature or fashioned from materials that originally came from nature. Nearly all goods come into the latter category of being products of labour, in the sense that human beings have to exercise their mental and physical energies in order to create or produce them.

Producing a good does not involve creating new matter, but changing the form of existing materials. In the process of production human beings employ their own energies. and other natural forces and processes, to change nature-given materials into articles that can be used to satisfy some human need. Materials found in nature are given a new form, new physical characteristics. It is these newly-created characteristics capable of satisfying some human need that constitute goods and wealth. Wealth production is thus essentially a process of transformation of nature to make it useful to human life and happiness. Those goods which are products of labour are parts of nature that have been so transformed.

A good, then, is a part of nature which has, or has been given, particular physical characteristics which can be used to satisfy some human want. These useful characteristics of a good are its use-value. As in the end the good is its useful characteristics — it is these that make it a good for humans — the word use-value can be used as a substitute for good.

An item of wealth is always, by definition. a use-value but under certain circumstances can also acquire another characteristic which has also been called value. But how can an item of wealth have a value for humans other than its use-value? Surely the value of a good can only be its ability to satisfy some particular human need? These common-sense, and basically correct, observations caused the early political economists no end of trouble when they came to study the prices which goods acquired in an exchange economy. For they noticed that the proportions in which goods exchanged for each other bore no relation whatsoever to their relative utilities, or use-values; goods which were very useful, even vital, to human beings had a relatively low price while goods which had a limited use-value, such as gold and precious stones, had a relatively high one. The answer found to this paradox was that prices did not in fact measure use-value but some other kind of value: exchange-value.

A good produced for the purpose of being exchanged has traditionally been called a commodity in English. From an etymological point of view this is unfortunate since "commodity'' ought to be an alternative way of saying "good" or "use-value". but the usage is too long-established to be changed. It still remains true that the German and French equivalents — Ware and Marchandise — are much more expressive since they immediately indicate that what is being talked about are not goods as physical objects but goods as articles of commerce, as "wares and merchandise". But just as we can call goods use-values so we can call commodities exchange-values.

Strictly speaking, exchange-value and value are not the same. The exchange-value of a commodity is the expression in exchange of its underlying "value”, of the economic value which it has in an exchange economy even when it is not being exchanged. The disagreement between Marx and orthodox economics was not so much over what determined value (for Marx, and some others, it was the amount of socially necessary labour incorporated in a commodity in the course of its production from start to finish) as over its nature. For Marx value was not a feature which goods possessed by virtue of being goods but a social relation, a feature goods only acquired in commodity-producing societies; in other societies the only value goods had (or would have) was their use-value.

The other expression of value in an exchange economy is money as a unit of account. Money originated from barter, the simplest form of exchange, as the one commodity in which the exchange-value of all other commodities could be expressed and measured. Money still performs this role today so that exchange-value normally appears as a price expressed in monetary units.

This distinction between use-value and exchange-value, between wealth and value is a key concept for understanding capitalism, which is essentially a system in which wealth is produced as value rather than exclusively as use-value. This is because capitalism is an exchange economy in which most wealth, from ordinary consumer goods to vast industrial plants and other producer goods, takes the form of commodities, items of wealth that have been produced with a view to sale on a market.

Commodity production existed before capitalism but in previous societies was marginal to the predominant form of the production of wealth. In previous societies such as feudalism wealth was principally produced for direct use and not for sale on a market. Wealth was used by those who produced it or else by the privileged classes who lived off the producers and acquired wealth from them by the actual or threatened use of force. In capitalism the roles of production for sale and production for use are reversed; it is now production for use that is marginal, while the great bulk of wealth is produced for sale. In particular, the elements needed for producing wealth (raw materials, machines, and human mental and physical energy) become commodities.

Adam Buick

You’d be surprised. (1923)

From the June 1923 issue of the Socialist Standard

Sir Oswald Stoll, writing in the Referee, April 15th, 1923, disputed the definition of value given by Karl Marx in Capital. He says that Adam Smith’s work, “The Wealth of Nations,” although it yields no support to Marx, nevertheless contains the fatal error on which the Socialism of Marx is founded, i.e., that “labour is the real measure of the exchangeable value of all commodities.” Sir Oswald then says:—

  “It requires little wisdom to realise that the labour which is alleged to be the real measure of the exchangeable value of coal, for instance, must include the labour of nature. Human labour cannot begin where nature finishes, because nature never finishes. Nature made the coal by heating and compressing vegetable matter; nature made also the materials used by labour in mining the coal. The term ‘ labour ‘ is therefore too abstract and general for such specific application. Hence labour cannot be ‘the real measure of the exchangeable value of all commodities’.”

Sir Oswald is described by the Referee as a keen student of economics and socialism. His description of the part played by Nature in the production of wealth was clearly outlined in the early chapters of Capital, where it formed part of the careful analysis of a commodity. On page 10, “Swan and Sonnenschein” edition, Marx says :—

  “The bodies of commodities are combinations of two elements—matter and labour. If we take away, the useful labour expended upon them, a material substratum is always left, which is furnished by nature without the help of man. The latter can work only as nature does, that is, by changing the form of matter. Nay more, in the work of changing the form he is constantly helped by natural forces. We see, then, that labour is not the only source of material wealth, of use-values produced by labour. As William Petty puts it, labour is its father and the earth its mother.”

The work performed by Nature, however, goes on independent of the form of society under which men live, but Nature is neither capital nor the capitalist class; so the task still lies before Sir Oswald to prove where that class renders any assistance. Till now he has only accounted for the same factors as the Socialist : Man and Nature.

Of course no criticism of Marx would be complete that did not prove, or attempt to prove, a contradiction against him. Most of the critics claim that Marx contradicted himself in the later portion of his works, but Sir Oswald is so keen that he discovers a contradiction that everybody has apparently overlooked in the very first chapter.

He accuses Marx of “converting the abstraction of labour into a material body ; a congelation of labour, and calling it value.” Of course what Marx really did was to show that the labourer worked upon the Nature-given material and changed its form or place. His labour thus became congealed in the finished product, and is the only thing—material or social—possible of measurement for the purposes of exchange. 

Marx analysed the labour contained in commodities and found that it must be looked at from two points of view in order to obtain a clear idea of value. It must be looked at from the concrete side, i.e., as labour of a definite kind that produces a particular article; for example, tailoring that results in the production of a coat—a use-value. It must also be looked at from the abstract side, i.e., as labour in general without regard to the particular way in which it is expended. In viewing labour this way it is necessary to forget that it is employed to produce coats, boots or tables, and simply look at it as the using up of a portion of society’s human energy. It is this general energy, or simple human labour, that is at one time spent in producing coats at another in producing tables, that forms the basis of value. In other words, human energy, at the same time, as concrete labour, produces use-values, and as abstract labour produces values. It is the fact that all articles produced represent proportions of simple human energy that enables them to be exchanged for one another through the medium of money.

Sir Oswald, the amateur economist, like all the professionals that have tried to demolish the Marxian theory of value, is left stuttering when asked to show what else but labour-power can be the real measure of exchange value. His alleged contradiction is that Marx before stating that “a congelation of labour is value,” had already said “that utility is value.” What Marx really says is that use-value is the utility of a thing. He devoted several paragraphs to the task of showing that use-value, or usefulness, cannot possibly be the basis of exchange-value; though he states quite definitely that all commodities must possess use-value, otherwise they are unsaleable.

In his analysis of a commodity Marx discovered it to consist of: a material substratum supplied by Nature, use-value or usefulness and exchange value. In addition it was the product of labour. How is the exchange value of a given commodity measured? Not by its material body, nor yet by its usefulness. Sir Oswald’s contradiction is therefore piffle, and the result of his inability to understand ordinary economic terms.

The gem of Sir Oswald’s economic absurdities is contained in the following :—

  “The theory that human labour is either value or the measure of value was killed in a sentence by the late Archbishop Whately when he reinforced the truism that ‘Pearls are not valuable because men dive for them; men dive for them because they are valuable.'”

Both the parson and the stage manager were answered by Marx before they raised this objection. “Diamonds,” said the latter, “are of rare occurrence on the earth’s surface, and hence their discovery costs, on the average, a great deal of labour-time. … If we could succeed at a small expenditure of labour in converting carbon into diamonds, their value might fall below that of bricks.” Similarly, if real pearls could be made as easily as beads, they could be bought for the same price as beads; but they cannot be so made; much diving has to be done for every one that is placed on the market and much labour of other kinds as well.

Sir Oswald winds up by saying : “It will be well to seek a real definition of value.” Those that seek shall find; let him search with all diligence, and then submit his results to those who do understand Marx.

F. Foan

Economics: the Marginalist Fallacy (2020)

From the June 2020 issue of the Socialist Standard

What is ‘value’ (economically speaking)? It is a good question and one that has often generated controversy. Classical economists like Adam Smith maintained that a commodity’s value depended on how much labour went into making it. This argument was taken up and refined by Marx. Then, in the late nineteenth century, partly in response to Marx’s own labour theory of value and the perceived threat it posed by exposing capitalism’s exploitative character, a new approach emerged. The ‘Marginalist Revolution’ in economics ushered in the idea of marginal utility – the satisfaction you get from consuming an additional unit of a good which declines with each additional unit consumed along with the price you are willing to pay. As the Austrian economist Ludwig von Mises put it: ‘It is ultimately always the subjective value judgments of individuals that determine the formation of prices’ (Human Action, 1940)

However, Von Mises’ explanation won’t wash. The ‘subjective value judgement’ a hungry beggar makes about a three-course meal contributes nothing to its price while they lack the money to afford it but there is, additionally, an obvious epistemological flaw in Mises’ thinking. ‘Subjective value judgements’ are something only individuals can make – not society – but prices are the emergent outcome of millions of individuals interacting, each of whom are external (objective) to everyone else. Furthermore, as social phenomena, prices clearly influence our valuation of a commodity by making us more – or less – inclined to buy it. So the subjective theory of value is based on circular reasoning. Prices are supposed to be determined by subjective valuations which, in turn, are determined by price.

Does this mean that subjective valuation – the utility or ‘use value’ of a good – has no role to play in price formation? Of course not. As Marx himself noted ‘nothing can have value, without being an object of utility’ (Capital, Vol. 1, Ch. 1). However, while the subjectivists conflate ‘use value’ with ‘exchange value’ he insisted they be distinguished. Use value could not account for exchange value even though it was a precondition of market exchange. Fundamentally, only labour could provide a sound explanation of value under capitalism.

Why? Drawing on Aristotle’s observation that ‘exchange cannot take place without equality, and equality not without commensurability’, Marx reasoned that this ruled out utility as the basis on which commodities exchanged. This was because the utilities of chalk and cheese (or anything else) are essentially incommensurable. Commodities can only exchange on the basis of something they have in common.

What jackets and pairs of shoes have in common is the fact that they are both products of human labour. Exchanging one for the other presupposes each took roughly the same amount of labour to produce. After all, no one would exchange something worth more for something worth less.

Equivalence is assured by adjusting the ratios in which commodities exchange. So if our jacket takes more labour to produce than a pair of shoes this may mean exchanging it for, say, three pairs of shoes to ensure equivalence. Of course, today we don’t normally exchange jackets for shoes – barter. Instead, we use money as a universal equivalent with the ‘exchange value’ of a good being expressed in price.

The relationship between price and value in Marxian theory often gives rise to misunderstandings. Largely, this is because critics fail to grasp Marx’s method. As Michael Harrington notes:

  ‘Therefore the reader must be warned that the opening pages of Das Kapital – or, for that matter, the entire first volume – contain conscious simplifications. Marx, like everyone else, actually began with the “chaotic whole” of immediate experience, but in his masterpiece he follows a logical rather than an experiential order. So in understanding any part of the Marxian analysis one must carefully ask: Under what simplifying assumptions is it subsumed’ (Socialism, 1972).

As Marx’s argument unfolds, one ‘conscious simplification’ after another disappears. The purpose of this procedure is to arrive at a progressively closer approximation of capitalist reality. Hence the initial hypothesis that commodities sell at their values gives way to a new hypothesis that commodities sell, not literally at, but around, their value and that their price is influenced by other factors apart from value – such as the interplay of supply and demand.

That does not invalidate the theory, however. Though there is a constant disequilibrium in capitalism, there is also a constant tendency for supply and demand to adjust to each other via the price mechanism. In the long run, argues Marx:

  ‘If supply equals demand, they cease to act, and for this very reason commodities are sold at their market-values. Whenever two forces operate equally in opposite directions, they balance one another, exert no outside influence, and any phenomena taking place in these circumstances must be explained by causes other than the effect of these two forces’ (Capital, Vol. 3. Ch. 10).

Thus, after balancing out supply and demand we have still to explain why, say, a Berlingo van consistently costs so much more than a Raleigh bicycle. It is at this deep structural level that the law of value exerts a powerful gravitational pull on prices. This is buttressed by the fact that prices cannot fall below a business’s costs of production for any length of time which has the effect of keeping them firmly within the orbit of value.

One should bear in mind also that Marx’s theory does not equate ‘value’ with the actual amount of labour it took to produce a good – ‘concrete labour’. If that were the case there would never be any incentive to introduce labour-displacing technology since this would mean less value being produced. Rather the metric of value is ‘abstract labour’ – the socially necessary labour time it takes to produce a good, from start to finish, under average industry-wide conditions.

Socially necessary labour-time is not something you can measure with a stop watch – like concrete labour. Moreover, it can only express itself through market exchange. As Marx explained in the same work:

‘Social labour-time exists in these commodities in a latent state, so to speak, and becomes evident only in the course of their exchange. Universal social labour is consequently not a ready-made prerequisite but an emerging result’.

This means that the value of a product can change even after it has been produced as a result of ongoing technological and other changes.

Robin Cox