The Labour Theory of Value - Part 2 (1937)

From the August 1937 issue of the Socialist Standard

(Continued from the July issue.)

Of course, it is only necessary labour which counts as value. If one uses old-fashioned methods or obsolete instruments, or wastes more time or energy or materials than is necessary compared with the generally prevailing knowledge and equipment, this unnecessary additional labour will give no additional value to the product. Society is the accountant, not the producer. The value of a commodity is determined by the amount of socially necessary labour required to produce it.

'

The objections of the orthodox economists, and their alternative theories mentioned above, are more significant than important. It is to be expected that they should be preoccupied with an explanation of "price," which is what chiefly concerns their employer, the capitalist. It is not to be expected that they should occupy themselves with a theory of value which strikes the capitalist where he can’t take it, as we shall see. What is important is that the capitalist substantiates the labour theory of value in actual practice. He acts upon it and it works. Not only does he pay more for skilled workers than for less skilled, according to the time and cost of producing that skill, but he constantly aims to reduce the value of his products by eliminating waste, improving methods and so on, while hoping either to go on selling at the old price and thus making an extra profit, or to reduce his price to the new value and smash his rivals. The means of production are thus continually being revolutionised in one industry or another by the constant competition to produce commodities at lower values. The capitalist demonstrates in practice what his economists cannot tell him in theory.

Since value, the quality peculiar to commodities, manifests itself only in exchange it is not surprising that the history of exchange is a large slice of human history. Beginning in primitive times with exchange, between tribes, of surplus products incidentally left over after their needs were satisfied, it initiated the production of surpluses purposely intended for exchange and not for use, the production of commodities, and soon came the need to set apart one of these commodities to serve as a common medium of exchange for all others; this commodity thus becoming— money. Tribal enemies captured in war were not now put to death, but made slaves for the production of surplus wealth. Accumulation of private property, class exploitation, and commodity production are an inseparable trinity. The slave civilisation of the ancient world, of Greece and Rome in particular, witnessed the death-struggles of tribal Communism and saw arise the new system based on private ownership and class exploitation. This under Mediterranean hot-house conditions. In Northern Europe a slower and vaster development of commodity-relationships awaited the coming of the world market. Ocean navigation, conquest and colonisation; conversion of feudal dues into money rents, influx of silver from newly-discovered mines, “enclosure” movements, which took away the peasants' lands, the power-machine factory movement, which pauperised the handicraftsmen—both classes bereft of any claim on the means of production and became proletarians, the working class, wage-slaves of a small class now in exclusive possession of the means of life: the capitalist. These were the processes by which the commodity came to maturity.

The commodity has come of age. For now the very source and content of value, labour-power is itself a commodity. Men are not men but hands in the labour market, hoping for a bidder, rotting without one.

It is here that the importance of the distinction between usefulness and value comes home. It is the distinction which earlier labour theories of value, notably that of Ricardo failed to make between labour and labour power. It is the secret of capitalist exploitation. The worker sells his labour power (his knowledge, skill, energy) for a price, his wages, salary, fees, commission, etc., which, on an average is its value. The worker gets the value of his labour power, the socially-necessary cost of reproducing it—the cost of living. The capitalist, having bought the commodity, proceeds to enjoy the use of it as fast as he can and as long as he dare. By lengthening the working day, or by speeding up, by fines and penalties, by regimentation and discipline, by team competition and pace-setting, by psychological research and cups of tea he squeezes from the worker a far greater quantity of labour than the value of his labour power. He extorts surplus value.

Marx’s analysis of the commodity unearthed a secret which will bury a society! “What capitalism produces above all things are its own gravediggers,” and this is the grim and glorious spadework for which the S.P.G.B. is organised. There are plenty of spades, fellow-workers, waiting but the hands to use them.

Frank Evans.

Two questions about value. (1926)

From the November 1926 issue of the Socialist Standard

We have been asked to answer two questions relating to value.

The first question is : “Has land a value?”

The problem is easily solved when once the nature of value is grasped. Broadly speaking, value is embodied human labour-power under particular conditions; that is, human labour-power, or human energy, expended in the production of useful articles for sale. Whether such labour-power is expended at the beginning of the process of production, or at the end, makes no difference to the point in question. That which has not had any human labour-power expended upon it, cannot, under any conditions, have value.

Land, in the sense of virgin soil, natural meadows, ore-bearing soil, or the like, has no value whatever. Land that has been prepared for a productive process, that is, land that has been ploughed, manured, or otherwise worked upon for a productive purpose has, under the given conditions, a value, and this value is preserved in the product wheat, oats, corn, or whatever else the product may be.

The second question is : “Do wage-workers in the distributive processes produce value?”

Here, again, the question admits of an affirmative and a negative answer, according to what is meant by the “distributive processes.”

If by the “distributive processes” the questioner means the transport of an article from its source of production to a spot where consumption requires it, the wage-workers in the transportation industries add value in such distribution. If, however, “distributive processes” means merely the transport of articles to a place where it will be more profitable to the capitalist to dispose of them, then value may not be added by the wage-workers in question.

Perhaps a little enlargement upon the question may make the matter clearer.

An article has no usefulness except in its consumption, and in order that it may be consumed, it may have to be transported. For instance, wheat gathered and sacked in the centre of America has no usefulness to hungry people in London until it has been transported there. Assuming there is no other wheat available nearer than the centre of America, then the labour expended in transporting it to London adds value to the wheat. In other words, necessary labour adds value to products, whether in the actual productive process or in transportation.

It is easy to see that the wheat must be collected and transported to the particular spot in which it is housed, an extension of this process is the transportation to the consumer—providing, of course, the above conditions as to its social necessity are observed. In these circumstances the transportation is an extension of the productive process.

Gilmac.

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

Marx’s world view (2020)

Book Review from the May 2020 issue of the Socialist Standard

A Promethean Vision: The Formation of Karl Marx’s Worldview. By Eric Rahim, Praxis Press, 2020.

In Greek mythology Prometheus defied the gods by stealing fire and giving it to humanity, as a symbol of civilisation. Zeus then punished him by having him tied to a rock with an eagle eating his liver. In the forward to his doctoral dissertation Marx quotes from Aeschylus’ Prometheus Bound where Prometheus tells Hermes, the servant of the gods:

Be sure of this, I would not change my state
Of evil fortune for your servitude.
Better to be the servant of this rock
Than to be faithful boy to Father Zeus.

In this short book Eric Rahim wonders if the 23-year-old Marx was beginning to think of himself as a latter-day Prometheus. At this stage Marx was not yet a communist. Rahim argues that Marx’s communist worldview ‘was fully formulated before he was 30 years old’, and the focus of this study is on the development of his thought up to that point with his writing of the Communist Manifesto in 1848. This is a bold claim. In his defence Rahim cites the economist Joseph Schumpeter who said that, at the age of 29, Marx ‘was in possession of all the essentials’ that make up Marxism.

Rahim is not the first writer to present Marx’s philosophy of history independently of his theory of value, but this creates problems for his conception of Marx’s worldview. For instance, in the Communist Manifesto Marx tells us that the ‘average price of wage-labour is the minimum wage’ required ‘to keep the labourer in bare existence as a labourer’. This is known as the Wage-Fund theory, according to which there is only a fixed pot of capital to pay out as wages, and so wages cannot rise above that amount. Marx only began to develop his own theory of value in the 1850s. In 1865 he gave a talk (published after his death as a pamphlet called Value, Price and Profit) which emphatically rejected the Wage-Fund theory and argued for a class struggle theory of value, according to which wage levels are determined by ‘the respective powers of the combatants’. This is no minor alteration of Marx’s worldview and it makes Rahim’s focus in this book look arbitrary.

Still, this could have joined the long list of ‘What Marx Really Meant’ books if it were not for a section near the end entitled ‘After the Revolution’. At this point Rahim substitutes Lenin for Marx without admitting it or possibly without being aware of it. Rahim asserts that, after the revolution, there is a long transitional phase of communism in which the state is the dictatorship of the proletariat. For Rahim it follows from this that distribution will be governed by ‘the same principles that govern income distribution under capitalism… During this phase we will still have wage labour’. Rahim refers to this as ‘to each according to his work’. His use of quotation marks here suggests that he is quoting Marx.

What Marx really said is that when the working class ‘win the battle of democracy’ (the dictatorship of the proletariat) they will use this political power to establish communism. In the early phase of communism there will be restrictions due to the conditions of the time (1875 when Marx wrote this). With progress these restrictions will fall away in the later phase of communism. It is important to note however that in both phases of communism there is no state, money economy or wages system. ‘To each according to his work’ is a later Leninist fabrication, although Lenin himself, in State and Revolution (1917), used the Biblical injunction: ‘He who does not work shall not eat’.

This point should be seen in conjunction with Lenin’s insistence on the leading role of the vanguard party. This is important because whenever and wherever the Leninist model has been followed it has always ended in a state capitalist dictatorship over the proletariat, and Marx’s worldview gets dragged through the mud.

Lew Higgins

What is value? (1962)

From the November 1962 issue of the Socialist Standard

Private property, commodities and value are a troublesome trinity unless we understand them. There are three important aspects of value. The first is its purely social character which shows itself in buying and selling. The second is abstract human labour as the social substance of value. The third is the quantity of social labour which determines the magnitude of value. Buying and selling is the mode of exchanging wealth today. It involves careful weighing, measuring and counting against price to ensure that equal amounts of values change hands.

Exchange is a social act in which value is measured. In order to do this, a commodity must be related to some other commodity, different in kind, in which it can express its value. The value of the article, is, at all times, the chief concern of its owner. But it must be a use value to people other than its owner. In all equations, the article on the relative side expresses its value in the one on the equivalent side.

As an imaginary example of the elementary form of relative value we can equate a coat to a pair of shoes. In this case, the coat, occupying the relative side, is expressing its value in the material form of shoes. If we invert the equation we then express the value of the shoes. However, provided that each person sees, in the other’s useful article, a value content equal to that of his own, exchange takes place. Equal amounts of value are realised in the useful form of each other’s goods. As property owners both are satisfied.

In such equations it appears, on the surface, that value is an inherent, an intrinsic or material part of the commodities. This is an illusion. All value equations are social relations between men in society in which the legal transfer of ownership of property is determined on the basis of equal amounts of value being exchanged. It should be obvious that such acts can only take place in private property based societies.

The question now is—how is the ratio of exchange accurately determined? All useful articles differ greatly. Take coats and shoes, for example; they differ in material, form and purpose. The concrete (or producers’) labour in them is also very different. We have spinning, weaving, tailoring, tanning and shoemaking. It is productive labour which creates use values; both the labour and the articles are material in character and are different in quantity and quality. They cannot be measured in these forms.

If we disregard the specific type of the work (engineers, bakers, etc.) we reduce it all to the expenditure of human skill and energy in wealth production. The common denominator is therefore, abstract human labour. This is common to all commodities and is our measuring rod. Concrete labour produces use value whereas abstract labour creates values. It is important to note that value-creating labour must be useful, socially necessary, and of average skill and intensity. Irrespective of all differences in their material form or usefulness, all commodities are embodiments of the social substance abstract human labour. Social labour measures, in time, from the smallest fractions upwards simple or complex labour.

The magnitude of the value of any commodity is easily determined. In making this abstraction we are merely following the general practice in science. For example, we have steam, petrol, gas and diesel engines, etc.; all different forms of energy. In abstraction we reduce all of them to power and express it in units of horse power. If we now look at our equation (one coat equals one pair of shoes) we see that as embodiments of human labour the coat and the shoes are similar in quality and, as units containing x hours of social labour, they are equal in quantity. Equal amounts of labour time will always produce equal amounts of value.

Commodity production and exchange extended and developed from the elementary form of value, through expanded relative forms and general forms, to the present money form. This latter is its fully developed form and it works efficiently in expressing value. As Marx said, gold is not by nature money, though money is by nature gold. Gold functions socially, as a universal equivalent, as a measure of value, a standard of price, means of payment and al medium of exchange and circulation. In this capacity it functions as money and becomes the social form of value.

In this, its social function, it assumes an independent form of value because it measures value in its own bodily form and is socially accepted as the material form of value. It stands on one side of the relationship, the equivalent side, as value, opposed to all other commodities on the relative side. In this dazzling role gold appears as a sort of king amongst commodities. However, as a humble commodity, gold is no different from salt, oil or coal. Its value is determined in precisely the same way as all other merchandise. One coat equals one pair of shoes, or one ton of coal, or ten pounds sterling—all of these are different forms of the products of social labour and contain equal amounts of it, are in quality and quantity equal as values.

The exalted position which gold in its money capacity occupies is due primarily to its being a commodity and secondly to its nature as a metal, which renders it eminently suitable for its job. It contains great value in small bulk, is readily coinable and measures value from the smallest fraction upwards. In addition, it enables large quantities of accumulated wealth to be easily stored. As money it is the universally accepted social form of value. It represents the incarnation of abstract human labour and is the materialised form of value. It crosses all international frontiers and encounters no barriers. As a consequence of all this it also serves as universal social use value. The owners of money have immediate access to anything in the world of commodities, in proportion to the amount they have. The owners of all other articles for sale are constantly striving to attract money from the pockets of its owners.

While value is not a physical or material property of any article it is nevertheless a social reality of great importance. It finds its fully developed form in capitalism, in general commodity production. Men, women and children are converted into buyers and sellers whose major social relationships are value relationships. We socialists have abolished the spiritual trinity and impatiently await the workers organising to abolish the social trinities of private property commodities and value, and, with them rent, profit and interest.

John Higgins

Abolish Exchange (1969)

From the February 1969 issue of the Socialist Standard

In Marxian economics, there are four different applications of the term “value”—use-value, surplus-value, exchange-value and value.

Surplus and exchange derive from value, which is the whole basis of wealth produced under capitalist relations of production. Use-value stands out as the exception, it simply means the usefulness of any given product. This will be the sole surviving application of those terms in future society— Socialism.

Value is created in the process of production under conditions of capitalist exploitation. The idea of measuring the worth of a product only arises when it is to be alienated from its producers—when it is to be exchanged.

Value is determined by the amount of socially necessary labour, embodied during the production process; including administration and transport. The time taken to produce any given commodity under conditions of the prevailing intensity, determines in what proportions it will be exchanged for any other commodity. This exchange of values is obscured by the common equivalent of all commodities—money, But money only expresses or measures the amount of value, which is why it is a means of exchange and the standard of prices.

Value, therefore, has the deceptive appearance of being a relationship between things, whereas what lies behind it is a relationship between people. It is only because capitalism is a class divided society where the means of production are concentrated in the hands of a privileged minority, that the present set of economic and social relationships exists. Owner to non-owner, employer to employee, buyer to seller, rich and poor, landlord and tenant, all these relationships depend upon the divorce of the producers from their social products.

The exchange of value and the circulation of money as a means of exchange, demonstrates the existence of private property. Therefore, when organisations like the Labour Party and the so-called Communist Party talk about “Common-ownership of the means of exchange”, they are voicing a contradiction in terms.

Surplus value is the total surplus product over and above the total amount of wealth represented by wages. To obtain and enlarge this surplus value is the whole motive force behind production in capitalist society. The intervention of the State in industry by way of controls and nationalisation has obscured this fact in the minds of many workers, particularly those who support state capitalism in countries like Russia and China.

The wages system is the universal badge of class servitude and exploitation. When the class system of capitalism is scrapped, the wages systems will go with it; so will the alienation of the producers from their social products. Whereas to-day the product seems to dominate the producer, in Socialism this will be reversed. Where value and surplus value exist there is a barrier between the working- class and the wealth they produce. Poverty and insecurity are inherent in this situation. Wages only represent enough wealth, on average, to keep workers in working order and to provide replacements when they wear out.

When the markets and warehouses of the world are choked with unsalable masses of all kinds of goods, this is the time of greatest privation for members of the working class. Always our lives centre around finding someone to exploit us, in order that we may survive from pay day to pay day, while those who own the means of wealth production, and the rest of the things we produce, are able to live in luxury.

All wars in the modem world are predatory—fought by workers who own no means of production, to enable the victorious sections of the capitalist class to re-divide the plunder. Workers clearly have no stake in such a set-up.

Capitalism necessarily degrades both workers and capitalists in a thousand different ways. But this degradation presses harder upon the workers whose whole lives are spent as appendages to someone else's pursuit of profits, mere extensions to the productive resources of another class. They are harried and driven, deceived and deluded by more refined methods and to a greater degree of intensity than any exploited class in history. They are divided and subdivided and taught to take up the spurious ideology of their masters as their own. All this because wealth is produced as exchange values. An irresistible sequence of events follows from class ownership. A pattern of social conduct is brought about which must remain while this basis of society continues. The life of the working class is spent in struggles to maintain a meagre level of existence at the mercy of blind economic forces they as yet can only understand vaguely, if at all. Leisure becomes a respite between work shifts and work becomes a drudge to be regarded as a necessary evil, instead of an essential means of self-expression through social creativity. As much as workers hate employment and have little interest in what they do, they live in fear of unemployment and develop neuroses of resentment against “outsiders" like coloured people who are seen as a threat to “their” jobs. They fill half the hospital beds with cases of nervous and mental disorders which arise from the pressures to which capitalism subjects them. Yet, epithets such as "agitator" and “trouble-maker" are commonly applied to anyone who seeks change.

Things which workers produce but cannot afford, such as Rolls Royce cars, yachts and big houses are revered as luxuries—the status symbols of a privileged few whose social prestige is supported by possession. These things contain so much workers’ congealed labour, that they are beyond the means of those who produce them. There can be no greater social absurdity than this.

With the advent of Socialism, goods and services of all kinds will be produced solely for use. Social products will no longer be exchanged, but will be freely available, because the means of production will belong to society as a whole. There will be no means of exchange or any other barrier between people and the things they need.

The pattern of conduct that follows from common ownership will be a harmonious one; just as that arising from class ownership is antagonistic. Human dignity will again be able to assert itself, free from exploitation. The conditions which cause war and poverty will disappear.

People will willingly co-operate because they will be conscious of their involvement in society and will be in control of their environment. The fact is that in order for Socialism to be established, a majority of the world’s workers must understand and desire it. From the basis of this understanding, new, truly human relationships will arise in place of the crude cash nexus.

Harry Baldwin

The Value of Value (2018)

Book Review from the July 2018 issue of the Socialist Standard

‘The Value of Everything. Making and Taking in the Global Economy’. By Mariana Mazzucato. (Allen Lane. 384 pages. £20, hardback)

Mariana Mazzucato follows up her previous book, ‘The Entrepreneurial State’, with this fascinating look at how theories of value shape policy and economic behaviour. She reprises the core of that previous book in a chapter of this one, showing how much of the innovative success of capitalist firms in recent decades (such as the internet, GPS, etc.) actually stemmed from investment by the state, and only after the risky stage of product development did private capital swoop in to enormous rewards.

She begins with a brief history of national accounting, and how the question of the productive boundary – what is and is not a productive endeavour – gets brought into measuring these accounts. She notes that how we define this productive boundary shapes how we assess economic performance. She gives examples of difficulties: cleaning up pollution caused by industry adds to the productive side of the economy, but is actually correcting a major damage caused by cost saving by another firm. She notes that there is no economic accounting for housework and child rearing. She also points out that despite the role of the state in investing and driving innovation, the state is seen as inherently unproductive.

Her goal is not to define a new way of looking at value, but to open up the debate on why a theory of value is needed. She notes that the current orthodoxy, marginal utility theory (which essentially sees value as deriving from how useful the next additional unit of a good is, rather than how useful a good is in itself). Essentially, as she notes, this resolves into saying that the value of a good is whatever anyone is prepared to pay for it (and thus any good or services anyone pays for is productive). As a theory it abolishes any standard of value to measure prices by (it doesn’t allow for the concepts of bargains or rip-offs) and justifies the idea that markets are the most efficient measure of demand.

As she notes, marginal utility theorists maintain there is no unemployment, just a rational choice between income and leisure. As there is no measure beyond the market, it means that financial industries, that were once considered unproductive and merely distributive of wealth, can claim to be part of the productive economy. She passes into a quick mention of the idea that banks create money, with the added and helpful twist that sees that alleged ability deriving from the near monopoly of banks created by the state licensing system. This means, in effect that it isn’t private banks creating money, but the state.

She also gives a brief schematic account of the labour theory of value, and an account of Marx’ place in the history of the discussion of what is productive. She gives one of the better accounts of Marx’ theories you’ll likely find in any popular economics book. Marx noted that any activity that generates a surplus value for a capitalist was productive. What Mazzucatto misses in her account, is that Marx was clear that this was productive for capitalists and within a capitalist economy. This ‘valuable, for whom?’ is missing in most of her account, although she clearly gives hints that she would rather see a system of value accounting that gives a positive role to the state.

Her perspective is broadly Keynesian, seeing the struggle between the rent seeking of finance and the productive capacity of industry, and siding with productive capital. One aspect of her narrative that seems to undermine her case for stricter financial regulation, is that she recounts how the banks broke out of their previous regulated regime, and basically forced deregulation. Where there are profits to be made, they will be sought.

This is a useful read, and an opportunity for socialists to get involved in a debate about ensuring that the best way forward is to put an end to economic value through common ownership and the production of an abundance of wealth for use rather than exchange. We would still need mechanisms to assess resources and effective use, but we wouldn’t need a singular measure of personal wealth like a private market economy requires.

Pik Smeet

Russia and Marxian Economics (1970)

Pamphlet Review from the November 1970 issue of the Socialist Standard

‘Marxism and Market Socialism’. Irish Communist Organisation pamphlet. 5s.

“Market Socialism” is of course a contradiction in terms since the establishment of the common ownership and democratic social control of the means of production necessarily involves the abolition of the market. It is used here by a group of Maoists (they say that soon after the death of Stalin in 1953 the Russian government began a policy of “restoring capitalism” in Russia) in their criticism of the current economic doctrines of the Russian ruling class. They too see this term as contradictory but from a different angle since they accept Lenin’s false distinction between “socialism” and “communism”. Nevertheless this is an interesting pamphlet which makes some pertinent points.

“Marxist-Leninist literature”, a Russian economist Lev Leontyev has written, “has proved as entirely groundless the idea that Marx and Engels, and Lenin, pictured socialism as a natural economy without commodity-money relations”. To see why this is a distortion of Marxism we must know something of what Marx said.

Marx set out to examine how capitalism worked. Capitalism, he showed, was the most developed form of commodity production, a commodity being an article of wealth produced by separate, competing enterprises for sale on the market. The existence of commodity-production implies the existence also of private property, of private owners of commodities who buy and sell them. What prevents a complete breakdown of this unorganised system of production is the fact that commodities exchange in definite proportions depending on their value (or the amount of socially necessary labour used in producing them). It is through the impersonal workings of the market, called by Marx “the law of value”, that production is regulated under capitalism.

Socialism, by establishing the common ownership of all the means of production, brings commodity-production to an end. No longer is wealth produced by numerous separate enterprises all competing to sell their goods on the market. The law of value ceases to operate. Instead there is the planned production of useful things under the democratic control of society. This was the view of Marx and Engels and is the view of the Socialist Party of Great Britain. It was inherited also by the Bolsheviks who seized power in Russia in 1917. They proclaimed their ultimate aim as the abolition of the market and money and explained the persistence of commodity production after 1917 as a survival of capitalism which would gradually be eliminated. This is what the classic Bolshevik textbook of 1919 The ABC of Communism argues; it is also what the Irish Communist Organisation describe as “orthodox Marxism”.

In 1936 Stalin declared that Socialism had been established in Russia, despite the continued existence of commodity-production. This glaring contradiction was not resolved until 1943 when an article on “Teaching Economics in the Soviet Union” appeared in a leading Russian journal. This simply denied that Socialism involved the abolition of commodity-production and said that the law of value continued to operate under Socialism though, instead of acting blindly as under capitalism, it was consciously applied by the State. This line of thought has led today to Russian economists (just like their colleagues in the West) defending the market, and even rent, interest and profit as useful economic weapons. All this is traced and discussed in detail in this pamphlet.

In wishing to absolve Stalin from any blame for this distortion, the ICO is in a curious position. They say that the 1943 article “clearly represents revisionism at a high level of development and in an influential position in the CPSU” and imply that Stalin would not have endorsed it. This is most unlikely. So important an article could not have been written without Stalin’s knowledge or approval. Indeed it probably arose from the meeting Stalin had with leading Russian economists in 1941 which is mentioned in passing by one of the Russians quoted in this pamphlet. All the ICO have to go on to argue that Stalin held a view similar to the early Bolsheviks is some remarks in his Economic Problems of Socialism in the USSR, written in 1952.

It is odd that this pamphlet should be chosen as an example of the orthodox Marxist view. For it contains a very significant distortion of Marx’s view ― it argues that there will be “objective economic laws” under Socialism. An objective law is one that operates independently of the will of man. Natural laws are thus objective and so is the way capitalism works or what Marx called its laws of motion. A moment’s thought will show that there can be no such economic laws in a socialist society. For Socialism establishes full social control over the use of society’s productive resources. The production and distribution of wealth becomes purely a technical and administrative matter carried out in accordance with plans worked out and consciously implemented by human beings. Under these circumstances to talk of “objective economic laws” is nonsense. But Stalin was insistent on this point. “The laws of motion of the political economy of Socialism” he wrote, “are a reflection in the minds of men of objective laws existing outside of us”. But men could, he went on, discover what these laws were and “utilise them in the interests of society”.

In proclaiming that objective economic laws existed which could be controlled by the State in the interests of society, Stalin was paving the way for the current Russian argument that there is nothing as such wrong with commodity-production or money or the market or profits as long as they are properly controlled and not allowed to work blindly. This of course is the old impossible dream of capitalism planned to work for the good of all.

In a sense Stalin was right. The Russian economy has always been subject to economic forces that operate independently of men’s will. But that was because it is not, and never has been, socialist but a form of state capitalism.

Adam Buick

The Importance of Marxism—(continued) (1940)

From the August 1940 issue of the Socialist Standard

Continued from the July 1940 issue.

In preceding issues of the Socialist Standard we have discussed at some length the writings of the most outstanding economists and Socialists prior to Marx, and have, in addition to this, touched upon the scheme of Marxian Political Economy. Let us now consider the Marxian analysis more closely.

The Nature of Wealth Under Capitalism
Bourgeois economists have expressed divergent views concerning the true nature of wealth. The Mercantilists, for example, identified wealth with money, whereas the Physiocrats thought that only the products of agriculture could be regarded as real wealth.

Marx’s view on the subject is expressed clearly in the opening chapter of his famous work, “Capital,” where he says:—

  The wealth of those societies in which the capitalist mode of production prevails, presents itself as an immense accumulation of commodities, its unit being a single commodity.— (Vol. I, p. 41, Modern Library Edition.)

Commodities are articles produced for exchange or sale. In the May Socialist Standard we pointed out that every commodity is a combination of use-value and value, and that it is the latter quality which determines the commodity’s average price on the market, and not the former. The vendor of commodities is, as we know, primarily interested in the exchange value of his articles, and not in the fact that they will satisfy human needs of some kind. That the prime motive of Capitalist production is not the satisfaction of human wants, but rather “sale at a profit," has been demonstrated only recently by the tremendous destruction of coffee and cocoa, that has taken place in the colonies.

The Function of Money

Quite a number of people have misunderstood the rôle played by money. Britain has been literally overrun by miscellaneous currency cranks— from Major Douglas to the Imperial Fascist League—who either regarded money as the be-all and end-all of human existence, or else thought it an absolutely worthless object, perpetuated as a trick on society by unscrupulous financiers. In reality, however, money is the all-important medium of exchange—the resultant of the evolution of commodity exchanges. According to Marx the germ of money is to be found in the earliest accidental exchange of articles between one tribe and another—in barter. This elementary exchange Marx refers to as—

1. The Accidental Form of Value: 5 shells = 2 skins. In the, example cited above the value (i.e., the socially necessary labour) of one given commodity (shells) is expressed in terms of another (skins). With improved methods of production and, as a consequence, greater contact between tribes, the accidental barter of articles gives way to an increasingly enlarged sphere of exchange which Marx calls—
2. The Extended Form of Value: 5 shells = 2 skins = 50 beads = 2 sheep = 2 ozs. gold, etc. An illustration of this extended form can be found in the “Iliad," where Homer say: “To Atreus’ sons, as he gave charge, where merchandise it was, the Greeks bought wine for shining steel, and some for sounding brass, some for ox-hides, for oxen some, and some for prisoners.” (Book VII, p. 102, George Roulledge. -Ed.) Following on the extended form, we get—
3. The General Form of Value: 5 shells, 2 skins, 50 beads, 20 yards cloth, 2 ozs. gold = 2 sheep. In this third form the values of all commodities are now expressed in terms of one single commodity. At the dawn of civilisation it was cattle that predominantly functioned as the general equivalent in exchange, but this form was eventually supplanted by gold, silver and copper: articles that are easier to divide and transport. The expression of the values of commodities in terms of the precious metals Marx designates as— 
4. The Money Form of Value: 5 shells, 2 skins, 50 beads, 20 yards cloth, 2 sheep = 2 ozs. gold (or when coined).

This money form is the price form of commodities. Between forms 3 and 4 there are no differences, except that in the one case it is cattle and in the other gold which serves as the general equivalent. Fundamental differences exist, however, between forms 1, 2 and 3. The illustrations I have presented show that gold became money because it had previously served as an ordinary commodity. The value of gold, like the value of any other commodity, is determined by the labour time socially necessary for its production. Gold is portable, divisible, endurable and non-corrosive; moreover, a small quantity of it incorporates comparatively a great deal of labour time—hence these qualities eventually forced it to the top as the money commodity, as the universal medium of exchange par excellence. As far as paper currency is concerned, Marx has this to say on the subject:—

   The State puts in circulation bits of paper on which various denominations, say £1, £5, etc., are printed . . .  A law peculiar to the circulation of paper money can spring up only from the proportion in which that paper money represents gold. Such a law exists; stated simply, it is as follows: the issue of paper money must not exceed in amount the gold (or silver, as the case may be) which would actually circulate if not replaced by symbols.—(Vol. I, page 143.)

In recent years gold has ceased to function legally as money. The consequence of the abandonment of the gold standard has been precisely that which Marx pointed out would be the case, viz.:—

   If the quantity of paper currency issued be double what it ought to be, then, as a matter of fact, £1 would be the money name not of ¼ of an ounce, but of  ⅛ of an ounce of gold.—(P. 144.)

To-day gold sovereigns are bought and sold like any other commodity. This abandonment of gold as legal money in no way alters the basic economic laws of Bourgeois society. It can, however, be regarded as a disturbing feature—one symptom out of many of the underlying chaotic instability of recent international Capitalism.

For the sake of simplicity in the points that follow, we shall express prices in terms of gold coin—thus assuming gold as still the money commodity. The reader can easily reduce our illustrations to terms of present paper currency.

Capital and the Problem of Surplus Value

It has already been pointed out that the circulation of commodities presupposes in its pure form an exchange of equivalent values. This exchange of equivalents can be designated with the Marxian formula—

C—M—C or Commodity—Money—Commodity.

Let us illustrate this formula with two examples: (1) A handicraftsman has, shall we say, taken eight hours to produce a chair. He exchanges his chair (commodity) with, say, a gold sovereign (money) embodying an equal amount of labour, and with the money obtained he purchases a clock (commodity) in which eight hours of labour are also incorporated. (2) A worker sells his labouring-power (commodity) for wages, and with the latter buys articles of consumption (some commodities).

The formula for capital is, however:—

£100—Commodities—£ 110
M — C — M

and in this case it is no longer a question of recovering a mere equivalent, but of throwing into circulation a given amount of value for the purpose of recovering a greater amount. This increment obtained, or surplus of value over the original amount invested is what Marx calls surplus-value. Thus, capital is money invested with a view to gain or surplus-value. The problem Marx set out to solve was: on the assumption that in exchange only value-equivalents are given, where does the surplus-value come from?

That capital is not merely wealth, as such, but wealth invested for the specific purpose of profit, has been either completely ignored or hotly disputed by the Bourgeois economists. Karl Kautsky, in his work, "The Economic Doctrines of Karl Marx,” has the following interesting observations to make in this connection:—

   It is value that breeds surplus value. Those who ignore this movement and try to conceive of capital as an inert thing will instantly involve themselves in contradictions. Hence the confusion in the orthodox text-books concerning the idea of capital, and the question as to which things should be regarded as capital. Some define it as tools, which implies that there were capitalists in the Stone Age. Even the ape, which cracks nuts with a stone, is a capitalist; likewise, the tramp’s stick, with which he knocks fruit off a tree, becomes capital, and the tramp himself a capitalist. Others define capital as stored-up labour, according to which marmots and ants would enjoy the honour of figuring as colleagues of Rothschild. Bleichroeder and Krupp. Some economists have even reckoned as capital everything which promotes labour and renders it productive, the State, man's knowledge and his soul.—(Pp. 53-54, A. & C. Black Edition.)

The prevailing form of capital is industrial capital. Commercial and financial capital are historically much older, but, to-day, play but a subordinate part alongside the capital of the industrialist.

It is in industry that surplus value is produced. Precisely how this is done we shall discuss in next month’s Socialist Standard.

Solomon Goldstein

Squaring the Circle (1967)

From the September 1967 issue of the Socialist Standard

Russian state capitalism claims that Marxian economics is its economic theory. The Socialist Party of Great Britain rejects this claim. A comparison of Marxian and Russian state economics will show that in Russia Marx’s theories have been twisted beyond recognition.

In Capital Marx examines the working of capitalism in detail. He takes as the basic unit of the capitalist economy the commodity, an item of wealth produced for sale. Where goods are produced for sale then, and only then, do they have a value. The law of value operates only where there is commodity-production. For thousands of years goods, produced for sale under pre-capitalist conditions, exchanged more or less at their values. Capitalism, which is a system of production for profit as well as for sale, is more complex and commodities only accidentally exchange at their values. Nevertheless the law of value still operates. In fact, under capitalism all the paraphernalia of exchange—money, prices, trade, banks, bills, bonds, credit—are developed to a high degree.

For Marx the classless society that would replace capitalism—which he called either Socialism or Communism— would not be an exchange economy. Wealth would be produced for social use and not for profit or for sale. Hence the law of value would not operate in Socialist society. There would be no commodities, no money, no prices, no trade, no banks and the like.

This was also how all the Social Democratic writers on Marxian economics, people like Kautsky, Luxemburg, Boudin and Untermann, saw it. The standard textbook on Marxian economics used by all sections of Russian Social Democracy, including the Bolsheviks, was A Short Course of Economic Science by A. Bogdanov first published in 1897. Bogdanov was not a Bolshevik (in fact he later came to see Russia as state capitalist) but his book was still used after 1917 and was translated into English in 1923 and distributed by the so-called Communist Party of Great. Britain, from whose edition we quote:

The new society will be based not on exchange but on natural self-sufficing economy. Between production and consumption of products there will not be the market, buying and selling, but consciously and systematically organised distribution (p.389).

After 1917 the Bolsheviks felt a need for a textbook on their party's theory. Bukharin and Proebrazhensky were commissioned to write one. This work, The A.B.C. of Communism, appeared in Russian in 1919 and was translated into English in 1922. Here is what Bukharin wrote of Socialism (which he, for political reasons, calls Communism):

The communist method of production presupposes in addition that production is not for the market, but for use. Under communism, it is no longer the individual manufacturer or the individual peasant who produces; the work of production is effected by the gigantic co-operative as a whole. In consequence of this change, we no longer have commodities, but only products. These products are not exchanged one for another; they are neither bought nor sold. They are simply stored in the communal warehouses, and are subsequently delivered to those who need them. In such conditions, money will no longer be required (p72).

This, then, was the theory that the Bolshevik rulers inherited and it was in fact the Marxian position. After thinking they were introducing Socialism in Russia immediately, the Bolsheviks were forced to face the facts: the transition from capitalism to Socialism which they saw as their task was going to take a long time. Their experts on Marxian economics argued that in the transition period the law of value, together with money, prices, wages and profits, would continue to operate but would gradually wither away as the transition period drew to an end.

However, when in 1936 Stalin proclaimed that Socialism now existed in Russia, such a radical departure from Bolshevik, let alone Marxian, theory was bound to lead to difficulties. For Marx Socialism was not an exchange economy, yet in supposedly Socialist Russia all the paraphernalia of exchange existed. How was this contradiction to be explained? Stalin’s philosophers erected a false distinction between Socialism and Communism (which Marx used interchangeably to refer to the classless society of the future) saying that Socialism was a stage below “full” Communism, when there would be no exchange. But this was not really adequate for till then the Bolsheviks had not seen even their “lower stage of communism” as an exchange economy. After much mental gymnastics the state economists had no choice; they had to square the circle. An article on “The Teaching of Economics in the Soviet Union” appeared in 1943 (translated into English in the American Economic Review of September 1944); The authors were quite frank:

The mistakes of the former teaching in denying the operation of the law of value in socialist society created insurmountable difficulties in explaining the existence under socialism of such categories as money, banks, credit, etc. The understanding of the role and significance of the law of value under socialism makes it possible correctly to cast light upon all these problems, in a strictly logical interrelation, proceeding from the premise that under socialism too the law of value functions and, furthermore, evaluating the fundamental peculiarities under which it functions in socialism (p.523).

They overcame the difficulties by merely asserting the law of value would still operate under Socialism and had the insolence to add that “the notion that the law of value plays no part in socialism is, in essence, opposed to the whole spirit of Marxist political economy.”

They argued that whereas under capitalism the law of value worked blindly under “socialism” it was controlled by the state in the interests of society. This led them to make some peculiar statements which seem like parodies on the Marxian position:

The labour of the members of socialist society produces commodities.
The value of a commodity in socialist society is determined not by the units of labour actually expended on its production, but by the quantity of labour socially necessary for its production and reproduction.
In socialist society the product of labour is a commodity; it has use value and value.

There was, however, one conclusion they stopped short of; that wages in Russia were the price of labour power. This would have conflicted with the claim that in Russia the exploitation of man by man had been abolished and that work was performed by the free labour of members of a classless community. For if wages existed so would the whole mechanism of exploitation. To this day this remains an inconsistency in Russian state economics. If anyone in Russia is going to point it out it will have to be the workers there, not the state philosophers.

After the war the Great Leader himself stepped in. In his Economic Problems of Socialism in the U.S.S.R., Stalin discusses “commodity production under socialism” and “the law of value under socialism”. The position decreed in 1943 still holds. A popular pamphlet Fundamentals of Marxist Political Economy, brought out by the Novosti Press Agency in 1965, poses the question “How does the law of value operate under socialism?”

Under socialism this law operates as a controlled force but it remains an objective economic law (p.122).

As a matter of fact the Russian state does try to plan capitalism by monkeying about with the law of value. Substitute “state capitalism” for “socialism” and Russian state economics begins to make sense. What is claimed to be Marxian economics is in fact the (mistaken) economic theory of state capitalism. It has nothing in common with what Marx wrote save some of the terminology.

Adam Buick

The Importance of Marxism—(continued) (1940)

From the May 1940 issue of the Socialist Standard

In last month's Socialist Standard we dealt in some detail with Marx's important discovery—the materialist conception of history. We showed that this conception was a scientific guide to the interpretation of historical events. In the light of this discovery, capitalism is depicted as a passing phase of social development and Socialists as pioneers of a new and more progressive order of society. This primary aspect of Marxism does not, however, exhaust the range of "Scientific Socialism." The extremely complicated internal structure of capitalism stands also in need of analysis, for unless we understand the working of this mechanism our demand for a Socialist society can rest only on historical foundations. It is Marx’s complementary discoveries in the realm of political economy that have ranked Socialist theory as an economic as well as an historical science.

Introduction

If the reader were to take a bird's eye view of our present economic system he would see it as an intricate network of establishments embracing industry, commerce, finance, law and social administration. Having thus surveyed capitalism, the first question that would most probably occur to his mind would be, " How does such an involved structure keep intact?" or, to express the same point in the language of economics, “What are the economic laws of this mechanism?" This very question may be said to be the subject matter of inquiry of Political Economy, the science that deals with the nature of wealth and the laws that govern its production and distribution. As Marx's concept of value and surplus value can really only be clearly understood when viewed in relation to Political Economy, it is desirable for us to consider the aim, scope and historical background of that science. By presenting the subject in this manner we shall enable the reader to more readily grasp the full import of Marx's economic discoveries.

Theory of Value

The central theme of Political Economy is the theory of value—a theory intended to solve the riddle of what it is that determines price. Why, for instance, should a diamond generally cost more than a hat, or a jeweller receive a higher price for his services than does an agricultural labourer? Problems like these have occupied the attention of economists for centuries.

There is one proposition, however, upon which practically all economists, prior to and contemporary with Marx, have been in agreement, viz., That the average price of an article is regulated by a certain standard, which may be called the article's real value. As a matter of fact, all of us in our daily experience recognise such a standard, for we frequently use the expression "value" in an economic sense during current conversation. We often say, for example, "I've paid more for this article than it's really worth," or conversely, “I've received splendid value for money."

Current Theories of Value

If the reader were to ask the Economic League what determines the value of a commodity he would meet with a reply we have so often received, viz., The value of an article is what it will fetch.

The Economic League are not the only ones to advance this proposition.

The columns of the Catholic Herald have contained a similar thesis in an article devoted to refuting Marxism.

Samuel Butler put it forward in verse in his work " Hudibras," more than two centuries ago, when he wrote: —

“The value of a thing
Is just as much as it will bring."

There may be some justifiable excuse for Samuel Butler and the Catholic Heralds but not so for our modern economists, whose reply surely begs the very question that was raised.

For what a thing will fetch is neither more nor less than its price! Value and price must therefore be considered identical.

But, then, the question still arises, “What determines this value or price?" Does the Economic League think there is any determinant? If not let them explain why a house costs more than a loaf of bread.

Let us leave this fallacy and turn our attention to a much more widespread but equally mistaken notion—the view that supply and demand determine the value or price of an article. In this connection one thing is quite true. If the supply of goods exceeds the demand for them market prices will fall; conversely, where demand exceeds supply (instance torches to-day) market prices will rise.

But let us assume a case where supply and demand are equal.

For example: There are six customers in a shop, each of whom, shall we say, demands a tin of biscuits, and the shopkeeper has precisely six tins of biscuits to sell. What happens in these circumstances ?

Will the shopkeeper charge no price for his wares, just because supply and demand happen to be equal—or will he possibly ask one of his customers to walk out of the shop so as to enable him to fix a price?

Actually, of course, the average price of an article is fixed prior to supply and demand. The latter are factors which send the market price sometimes above the average and at other times below, but they no more determine the height of the average price of a commodity (i.e., the price considered, in normal circumstances, over a given period) than the oscillations of the waves of the sea determine the height of the sea level.

Besides—to those who contend that prices are determined by supply and demand, we would pose the following question: What determines supply and demand?

Finally, let us not omit a reference to the theory of marginal utility.

It would take us too far afield to enter into all the manifold aspects of this modern bourgeois theory, so it must suffice to point out the following:—

Utility, whether marginal or otherwise, cannot possibly serve as an indication of the magnitude of value, for utility itself cannot be measured.

How are we to ascertain, for example, how much more utility there is contained in a diamond than there is in a roll and butter ?

Moreover, quite apart from being an objective measure of value, utility cannot even serve as a subjective measure of value for the capitalist. For it is precisely because the goods his workers have produced are absolutely useless to the capitalist personally that he exchanges them for money. In fact, the ironical part about it all is that their only use value is to him their exchangeable value. And this conclusion alone would lead us to reverse the notion that attributes the exchange-value of an article to its use-value, which is the essence of the theory of marginal utility. Moreover, bootlaces are certainly much more useful than battleships (at any rate, in peace time!), but to the best of my knowledge they have never commanded a higher price. An objection may be here raised that I have merely emphasised one aspect of the theory of marginal utility. I am aware of the fact that there are various schools of thought on the question—that there are some who interpret marginal utility to mean “final demand" and others who include in their idea of utility the concept of “cost of production." These points, however, have already been met in other sections of the article.

Man on Value

According to Marx . . .

That which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour-time socially necessary for its production. . . . As values, all commodities are only definite masses of congealed labour-time. — (“Capital,” Vol. I, page 46, Modern Library Edition.)

On the same page he says: —

The labour-time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time.”

He then gives the following example of the theory: —

Diamonds are of very rare occurrence on the earth’s surface, and hence their discovery costs, on an average, a great deal of labour time. Consequently much labour is represented in a small compass . . . If we could succeed, at a small expenditure of labour, in converting carbon into diamonds, their value might fall below that of bricks.” (Page 47.)

We shall elaborate on this labour theory of value in a later article. Here we wish to draw attention to the formulation of this concept by economists before Marx—to the evolution of the theory, so to speak.

The Labour Theory of Value Before Marx

One of the first to grapple with the problem of value was Sir William Petty (1623-1687), Governor- General of Ireland. Petty has been called “the father of Economic Science." In his “A Treatise on Taxes and Contributions," written in 1662, he says: —

  If a man can bring to London an ounce of silver out of the earth in Peru in the same time that he can produce a bushel of corn, then one is the natural price of the other. Now if by reason of new and more easy mines a man can get two ounces of silver as easily as he formerly did one, then corn will be as cheap at ten shillings the bushel, as it was before at five shillings. (P. 43, Cambridge Edition.)
  Labour is the father and active principle of wealth as lands are the mother. (P. 68.)

Petty also held a very clear view on wages:

The value of the average daily wage is determined by what the worker needs—so as to live, labour and generate. (P. 60, “Political Anatomy of Ireland,” British Museum Copy.)

Petty was not, however, always consistent in his views. He laboured to a considerable extent under the Mercantilist illusions of his day—the view that only money had any real value. Expositors of the labour theory of value were also Benjamin Franklin (1706-1790) and Richard Cantillon (died 1734), but their views, like Petty’s, were vitiated by Mercantilist notions, which were more or less an expression of the interests of the rising merchant capitalists.

The Mercantilist economists were succeeded in the order of time by the “Physiocrats," the French school of Political Economy. In their works, Francois Quesnay (1694-1774) and S. R. J. Turgot (1727-1781), the leading representatives of this school, divide society into three classes—agricultural, land-owning, sterile (manufacturing, trading, artisan). Physiocratic theory coincides with the interests of the rising French farming class, at that time occupying an ever-growing influence.

Labour was the source of value and surplus value, thought the Physiocrats, but only so far as agriculture was concerned.

Solomon Goldstein

(To be continued)

Correspondence. (1923)

Letter to the Editors from the March 1923 issue of the Socialist Standard

Dear Sirs,

Could you please answer these questions below, in order to clear up a great deal of misunderstanding?

1. When is the value of a commodity determined?
2. Can additional value be added to the commodity in the process of distribution?
3. Has distribution any determining factor in the value of a commodity?

Sid Felperin

Reply:

A commodity is a useful article produced for exchange. It is the result of the application of human energy to the material provided by nature. Its value {a social relation) depends upon the amount of labour required to reproduce such an article in a given society under certain given physical and social conditions.

All the labour necessary to obtain the raw material, work it up into the product required for consumption, and transport it to the point where such products are necessary for consumption, adds value. Coal produced for the needs of London is of greater value in London than in, say, Newcastle, its source of production. But labour used up in transporting coal from its source in Newcastle to London and then back to Newcastle for consumption would add no value to the coal.

Articles so produced are bought and sold upon the market. The market is the sphere of the circulation of commodities. In this circulating process no value is added to the product. The necessary storing, accounting, advertising and such matter are expenses of circulation but do not increase the value of articles as they come upon the market with their values already determined.

The fact that some articles sell above and others below their values, and that here and there one capitalist may gain an advantage over another are matters we cannot enter into here, but they do not affect the general position that the value of an article depends upon its cost of reproduction in human energy.

Expenses of circulation such as those mentioned above are generally included under the heading, “Overhead Expenses” by capitalist concerns. Such expenses are paid out of the surplus value obtained in production.

The above brief explanation will clear the way for the answers to our questioner.

The value of an article is already determined when it comes upon the market for sale. The subsequent expenses of circulation are not productive expenses, and hence not value producing.

If by “distribution" is meant the transport of an article from its source of production to the place where consumption requires it, then value is added in such distribution. But if by “distribution” is meant the transport of articles to a spot where it is more profitable to dispose of them, then no value is added in such distribution. In the latter case the question is one of circulation which has already been dealt with.

The answer to the third question is contained in the answer to the first and second.

Ed. Com.

Socialist Economics: 2. Value (1974)

From the February 1974 issue of the Socialist Standard

Socialist Economics Series

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

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

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

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

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

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

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

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

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

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

Jim D'Arcy