"Utility" Goods (1950)

From the June 1950 issue of the Socialist Standard

The 1939-45 Great War and His Majesty’s third Labour Government have made the people of this country “Utility” conscious, but long before 1939 such economists as Bohm Bawerk, Jevons and Marshall were searching in the realm of utility for an answer to the question why a pair of boots exchange for thirty shillings.

The fruit of their efforts is the much-boosted Marginal Theory of Value by which they attempted to explain the value of a commodity—an article produced for sale—as the point at which marginal utility (the utility derived from that unit for which the consumer is just prepared to pay) coincides with the marginal cost of production (the cost to a firm that just pays its way). Thus they claimed their theory of Value takes both demand and supply into account.

Long before Bohm Bawerk and his Utility school of thought, Marx had shown that the value of a commodity is determined by the socially necessary labour time embodied in its production.

The Marginal school criticised this theory of Value on the grounds that Marx had looked at Value from the point of view of the producers and had therefore chosen “labour time” as the basis of Value. They contended that Value should be looked upon from the point of view of the consumer also and that Utility should form part of the basis of Value.

When Marx stated that the only quality commodities have in common with each other is that they are the “products of labour,” the Utility school pointed out triumphantly that commodities also have this in common—they must be useful. On these grounds they have argued that it is merely arbitrary to say that Labour is the source of Value. Indeed they have gone further and stated that only some useful things are the products of labour but all products of labour, if they are to be commodities, capable of sale and exchange, must be useful. They have pointed gleefully to the solitary traveller in the desert picking up a piece of gold or a diamond. They have argued that surely this piece of gold or diamond must have Value but its Value is certainly not determined by socially necessary labour time.

So frequently have the apologists of Capitalism put forward this view, that it is now accepted by most text-books on economics and is usually advanced by lecturers in Universities and Commercial Colleges as the Theory of Value which has ousted that of Marx.

In practically all books dealing with the classification of the Sciences, Economics is classified as a Social Science. That being so, Economics must be concerned with social relationships—the social relationships dealing with the production and distribution of Wealth at that.

We have therefore to examine the means by which Men produce and distribute the wealth of society in order to find which of these theories correctly reflect the law by which boots exchange for Gold (in the form of pounds, shillings and pence).

In all previous systems of society, production had been for use and only the surplus had appeared in the form of commodities but under our capitalistic system of society, production becomes solely for sale—for the World Market. Capitalism is therefore distinguished by the fact that here wealth takes the form of commodities.

In a commodity producing society extensive division of labour and private property are essential factors. That is to say the aggregate labour force of society consists of the sum total of the labour of all the producers of the different types of commodities who carry on their work independently of each other. When therefore we say that a fur cape is equal in value to a wrist watch we are really equating the labour of the furrier with that of the jeweller. In the early days of Man’s history when any surplus product was being exchanged, the question which confronted the two parties or groups involved in the exchange, say of arrow heads for skins, was this—Would it take us as long (or as much labour time) to produce these skins as it took us to produce the arrow heads? If the answer was in the affirmative then the transaction was completed. In the same manner the value of a commodity is determined by the socially necessary labour time embodied in its production.

What confuses the critics is that in capitalism value appears to be a quantitative relationship between things. They only see 100 bricks exchanging for two tables and do not see the SOCIAL RELATIONSHIPS underlying this quantitative equation.

In modern society, however, exchange does not take place in the form of barter (one article for another article) but Money enters into the field. Articles in the shop window have their price tag—their money form. Price is the monetary expression of Value, that is to say Price means the amount of gold equivalent in Value to the article which is being priced.

It is precisely in this developed form of Value that the law of Value manifests itself as the regulating principle of capitalist production. When the supply of a commodity is greater than the demand the price of the commodity falls and conversely when the demand is greater than the supply the price rises. The Capitalist economists see in this the regulator of the markets— the so-called Law of Supply and Demand.

Here again however, the Labour Theory of Value comes into its own. In our commodity producing society, the labour contained in a commodity has two aspects. It is the private labour of the commodity producer and at the same time part of the collective labour of society. To meet the last condition it must satisfy a definite social want—it must be useful to society. The private commodity producer fails to see his labour in this aspect—the social aspect. He never knows how much of a commodity is coming on to the market and what demand there will be for it. He therefore keeps on churning out his product until the demand for it drops and prices fall. Then he curtails production but he never dreams that the cause of the falling prices could be the fall in value of his product—a fall in value occasioned by the fact that he has expended part of the collective labour of society—his own private labour —USELESSLY. The value of a commodity being determined by the amount of SOCIALLY NECESSARY labour time embodied in its production, he has therefore not added one jot of Value to the commodities he has produced in excess of demand. Thus, does Marx’s Labour Theory of Value take Utility into account.

R.R.

Letter: Classes and prices (1976)

Letter to the Editors from the June 1976 issue of the Socialist Standard

IS and others accuse the SPGB of standing "aloof” from the class struggle. But surely the class struggle consists in that over which classes struggle, by which they derive their separate existences as classes, i.e. ownership of the means of life?

Money and wages are only manifestations of private ownership. Accordingly, the struggle over wages implies an acquiescence to the continuance of private ownership, unless accompanied by the revolutionary struggle to dispossess the capitalist class. The SPGB, far from standing aloof, appears to be the sole party concerned with the very essence of the class struggle and the solution that will terminate it—abolition of wage-labour and capital, the two sides of the same coin that is capitalism. It must be asked of others why they should demand anything less than Socialism, since the material conditions that make it practicable have long been in existence. Besides, the conspicuous absence of what one should expect from “socialists” — an unrelenting clamour for Socialism out of the horse’s mouth so to speak — serves only to banish authentic Socialism in the minds of the misinformed, and confuse the clear-cut choice between Socialism and capitalism.

A question on economics. How do you translate value into price and why it is that prices, according to supply and demand, fluctuate about value (or do they?)? How does value express itself in price, and what happens to the relationship between prices, profits and wages as value declines? Finally, how will value under Socialism compare with value under capitalism?

Robin Cox

Haslemere

Reply:

When talking of commodities, there are two distinct uses of the term "value”; use-value and exchange- value. Use-value is the actual physical utility of an object, i.e. a bicycle’s use is to be ridden as a means of transport. Exchange-value is the amount of "worth” a commodity possesses on the market, in the form of abstract human labour. Exchange-value equates different amounts of various commodities to each other. For example 1 oz. of gold may be worth 2 cwt. of copper. According to the labour theory of value, the more labour a commodity contains the more value it contains (the measure being socially-necessary labour time). The amount of socially-necessary labour contained in an object includes all the processes involved in its production, not just the last one.

Price is the amount that a commodity realizes on the market, and generally speaking commodities sell at or around their values. Prices reflect the value of commodities. While we are of course aware that supply and demand will affect price, when supply and demand are equal then commodities will sell at their value. In the case of monopoly the price can be kept artificially high, and in the case of subsidy artificially low. In times of inflation (i.e. the excess issue of paper currency) there is a general rise in the prices of all commodities, even though their relative values remain constant.

Whilst a capitalist who is selling a commodity may not himself know the amount of labour embodied in it, he does know what he has paid for it including those processes carried out before it reached his factory. He will ask as high a price as he dare on the market, but must always try to keep competitive with his rivals. In society, as commodities exchange, the values are transmitted unconsciously through the price of each transaction.

When commodities change their values, this is due to a change in the amount of socially-necessary labour involved in their production, and this change will be reflected in the relative exchange-value of the commodities. For example, if 1 oz. of gold will buy 2 cwt. of copper we may say that 1 oz. of gold=

2 cwt. of copper. If then the amount of labour required to produce 1 oz. gold is halved, but the same amount of labour is still necessary for 2 cwt. of copper, then 1 oz. of gold=4 cwt. of copper. Assuming gold to be the money commodity, a fall in the value of gold while other commodities retain their values would be represented by a rise in the prices of the other commodities. The converse would be true if the value of gold were to double.

It must be remembered that labour-power is a commodity and is special in that it is the only commodity able to create value and to reproduce itself. A wage is the price of labour-power and on average represents its value: that is, the amount necessary to the worker to keep him going in the same task and for him to bring up the next generation of workers. It is of course up to workers and their organizations to get as much as they can in the form of wages from their employers.

We agree with you when you say that the struggle for higher wages without a revolutionary Socialist purpose implies acquiescence to the system and its private-property relations. Most workers are not yet Socialists and again we agree that a lot of the blame for this must be laid at the door of “left-wing” parties, including is, for their confusion and misrepresentation of Socialism. Why indeed ask for anything less than Socialism? Socialism will usher out all the paraphernalia of capitalism including capital, commodities, exchange-value, wages, prices, etc. Instead production will be carried on for the benefit of the whole of society.

Editorial Committee.

Correction

The July 1976 issue of the Socialist Standard carried a correction to the original reply:

"We are grateful to correspondents who have drawn our attention to an arithmetical error which occurred in our reply Classes and Prices, June 1976. The passage read “If then the amount of labour required to produce 1 oz. gold is halved, but the same amount of labour is necessary for 2 cwt. of copper, then 1 oz. of gold = 4 cwt. of copped.” The last line should have read “then 1 oz. of gold = 1 cwt of copper." "

Cooking the Books: The Moral Mess (2023)

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

The subject of the Moral Maze on BBC Radio 4 on 8 February was billed as ‘Would the World be Better off Without Money?’ It turned out to be mostly about whether it was moral for the rich to have lots of money. Charlie Mullins, the proletarian founder of Pimlico Plumbers, said it was, because most of them reinvested it and so provided people with jobs and the government with taxes. Ash Sarkar said it wasn’t, because all wealth was produced by workers who were robbed of most of it by the rich. Darren McGarvey, the Scottish rapper, said there was nothing wrong with money as such; it was just that it wasn’t distributed fairly. He favoured Universal Basic Income. Sarkar seemed to favour cooperatives in which workers all got the same pay, missing the chance to argue for the ‘fully automated luxury communism’ she is supposed to be in favour of.

Up to this point, the assumption was that money was part of ‘the world as it is’ and the best that could be done was to distribute it differently.

A Czech economist, Tomas Sedlacek, finally addressed the question, arguing that the world would not be better off without money: the failure of past attempts to live without it showed that there was no practicable alternative to using money.

He and the Rev Giles Fraser got into an argument about the difference between price and value. But this was not about value in the economic sense of exchange-value but about use-value. What is useful is a matter of opinion or moral judgement. Sedlacek, who was an out-and-out defender of capitalism, made the point that price and use-value can never be the same — the buyer always places a higher (use) value on what they were buying than the seller does; otherwise there would be no sale.

This is a valid point which Marx made in chapter 3 of Capital on ‘Exchange’ where he wrote of the owner of an item for sale:

‘His commodity possesses for himself no immediate use-value. Otherwise, he would not bring it to the market. It has use-value for others; but for himself its only direct use-value is that of being a depository of exchange-value’.

An argument between an economist concerned with exchange-value (price) and a priest more concerned with use-value was never going to get very far. It did, however, bring out the contradiction between exchange-value and use-value that is a feature of the money system where goods are produced to be sold and not directly to be used.

The case for a world without money was put by Anitra Nelson, author of Beyond Money. She pointed out that ‘production for trade’ led both to people’s needs being neglected and to ecological upsets. She envisaged a world of relatively small-scale and more or less self-sufficient, democratically-organised moneyless communities, where households would be asked what their needs were going to be over a given period and then the community would organise itself to produce or acquire what was required, with people being able to access them without having to pay.

The right-wing journalist Melanie Phillips came up with the original objection that this was against human nature: it wouldn’t work because humans were naturally greedy and aggressive. Spiked editor Ella Whelan meanwhile denounced Nelson’s proposal rather unfairly as ‘austerity’ and ‘middle class miserabilism’ which the working class would never accept.

That was the problem. All those taking part seemed only to envisage a moneyless society as existing in small-scale communities, not even at national let alone world level. In some ways though, Nelson was on the right track. Organising production and distribution without money is essentially a question of assessing needs and then organising to produce to meet them. Given the level of development attained by the forces of production, this is only possible today on the basis of the common ownership and democratic control of the Earth’s natural and industrial resources.

Letter: Money and Price. A Critics Rejoinder and our Reply. (1928)

Letter to the Editors from the March 1928 issue of the Socialist Standard

Sir,

Mr. A. E. Jacomb, writing under above heading, fondly imagines that he replies to Rimington, whereas he does nothing of the sort. His greatest coup is a slip on my part wherein, by accident, I inverted the exchange rate of the £1 to the Dollar. Such cheap scoring is beneath contempt; and Mr. Jacomb would have shone indeed if he had succeeded in proving his case that a revolutionary change in the cost of reproduction did not affect the price of a commodity.

Jacomb expresses surprise that gold has price. Later on he says that an ounce of gold is coined into money expressed by the figure £3 17s. 10½d. In to-day’s paper, December 14th, 1927, I see that gold is quoted at £4 4s. 11½d. per ounce. Then he proceeds to mix gold up with currency, and asks, “What, then, is the monetary expression of money?”; of course, that depends upon what the money is made of. The golden sovereign contains gold that actually contains, and is a concentrated embodiment of a large amount of human labour power. Silver and copper coins, say 20s. or 240 pence, do not contain anything like as much. Their relations in exchange are arbitrary, and outside of the countries in which they are in use, their value, which consists entirely of the metals of which they are composed, would be represented as such, unless they could be returned to the country of origin. Of course, it will be meaningless to Jacomb that gold is £4 4s.11½ per ounce, and that it is a bad price; for taking £3 17s. 10½d. as the pre-war price, it means about 8 per cent. rise, whereas, according to the Index figure, other commodities are up 65 per cent. on pre-war. As the various Governments do not appear to contemplate a return to a gold currency, its price may grow even relatively worse, which may account for the Americans dumping it back again.

Price is the monetary expression of exchange value, and there is no divine hand that determines that the monetary expression shall be gold. Look at Germany during the inflation period ; prices equated to a printing press. It needed a mathematician with prophetic genius to know when to hold and when to part with goods— any old metal would have been preferable.

I have an idea that Governments have lost their faith in gold; the fact that it is being hawked to-day at £4 4s. 11½d. makes it look fishy. According to the book, it should be a lot more per ounce. Apparently the most, powerful monopoly, the gold interests, has been broken. The price, £3 17s. 10½d. per ounce, in pre-war days must either have left them a huge margin, else they have struck King Solomon’s deposits, and maybe that in time gold will function in place of aluminium as cooking utensils.

Next he questions my statement that commerce could not operate by a transference of gold without half the population being engaged in gold extraction. I should have said an enormous number, not half; for I do not know exactly how much labour power is necessary to raise a ton of gold. Nevertheless, I had previously stated that the amount of gold held by the banks only fractionally covered the paper in circulation, and when you come to consider that currency is but the small change of commerce, just imagine what would transpire if every business transaction meant that the purchaser handed over to the vendor a gold equivalent; why, we should have gold going about on drays, else the price of gold would get so far away from its value that an ounce would buy a battleship and the Gold Interests would buy a few planets with the surplus value.

Really, my dear Jacomb, you do try one’s patience when you ask such a ridiculous question, “What, then, is the golden equivalent of a hundred loaves of bread after they have passed into consumption?” and I feel that I am justified in saying that the golden equivalent of a hundred loaves of bread to-day must have considerably depreciated since the introduction of fixed nitrogen as a fertiliser. It would be difficult to get at the back of Rimington’s mind if one accepted Jacomb’s imputation of what I said in my criticism. Then he arrives at his greatest triumph, my slip in the inversion of the exchange rate of the Dollar to the £1, and after his ignorant guffaw, he impudently says that I said that their exchange rate had nothing to do with what they would buy in their respective countries. It is an assumption that these Governments will buy gold, but goods they are always ready to exchange for goods, provided that there is a margin and they keep a day to day tab on the exchange rate, i.e., how much goods the money will buy in each country. Some German firms actually quote to English buyers in American dollars; they have not faith in a constant purchasing power of the currency of either coantries, which is rather strange in view of the recent drop of the dollar to 4.88½. That is why I prefer to say that the value of currency is determined by whatever other commodities it will buy in its own country than gold. Its use value as currency has departed, and it appears to be an economic fifth wheel. Jacomb not only misquotes my criticism, but claims my arguments as his own, and then brazenly fastens his absurdities on me. He asks who is right; surely there are some S.P.G.B’ers. capable of putting him out of his misery, but do not let him dodge away. Is he correct in his economic interpretation in his article, “Should we produce more?”? (October, 27th, “S.S.”) I contend he is utterly wrong.

Yours fraternally,

F. L. Rimington.

Our Reply.

Mr. Rimington makes no attempt whatever to answer my questions : “What is the monetary expression of money?” and “How is the fall in the price of gold to which my critic refers expressed ?” The nearest he gets to answering the first is to say that it “depends upon what the money is made of,” and to follow with a rigmarole about silver and copper coins, which is quite beside the point, because, in this country, silver and copper coins are not money. Since this coinage does not contain value (past labour) corresponding to its face value, it cannot be the measure of value of other commodities, and, as Marx says (“Critique of Political Economy,” p. 164), “a commodity thus becomes money only in its combined capacity of a measure of value and medium of circulation.” In this country, then, money is gold ; and now I will show the ridiculousness of my critic’s position by quoting his own words. He said (“S.S.,” December, 1927, p. 54) : “price” is “merely an indication of the relative value of each commodity to the amount of gold contained in the £1 sterling.” On this showing, then, the “price” Mr. Rimington quotes for an ounce of gold (£4 4s. 11½d.) “is merely an indication of the relative value of ‘that’ commodity to the amount, of gold contained in the” ounce of gold which is coined into £3 17s. 10½ d. ! The two ounces of gold, then, are different. One has more value in it than the other. Well, sovereigns are not particularly hard to get, and it is quite legal to melt them down. Mr. Rimington can make his fortune by melting them. When he has stripped his sovereigns of their uniforms, and converted them into plain ounces of gold, he can take those ounces of gold to the Bank of England, where he will get £3 17s. 9d. for them—a loss of 1½d. Or he can recover in full at the Mint, who pay £3 17s. 10½d., but in that case he will have to wait for his money. Mr. Rimington is still challenged to show how the fall in the price of gold which he claims has taken place can be expressed, and before he takes up the challenge, let him square his answer with his statement that price “is merely an indication of the relative value of each commodity to the amount of gold contained in the £1 sterling.”

Mr. Rimington’s errors were so numerous and palpable in his first letter that I am afraid I missed the central idea of his attack, which was contained in the words, “goods exchange for goods . . . price was merely an indication of the relative value of each commodity to the amount of gold contained in the £1 sterling.” “Goods exchange for goods ” — ye Gods ! Mr. Rimington is himself so mixed that I offer no apology for not being able to disentangle his meaning from his inconsistencies at the first attempt. He is mystified by the market quotation, £4 4s. 11½d. per ounce, of gold and the mint “price,” £3 17s. 10½d., and can only think that the latter figures are mere reckoning figures, which have lost all touch with the actual value of gold. Only in this way can he arrive at the result that the writer was wrong when he stated that, if all producers doubled their output, prices would remain the same. Mr. Rimington sees in gold bullion something different to that which is represented by the £1 sterling. He loses sight of his own definition of price, quoted above, and imagines that gold produced at half the expenditure of labour-power is going to fall to half the “price” of gold sterling. In other words, the figures representing gold sterling are no longer what they pretend to be, and gold finds itself in fluctuating relations therewith. “Goods exchange for goods” ! Gold is no longer in the picture ! At one time it was £3 17s. 10½d. per ounce, but at present it is £4 4s. 11½d., and some day it may be, say, £1 10s. per ounce ! How does this agree with my critic’s definition of price as “an indication of the relative value of each commodity to the amount of gold contained in the £1 sterling”? Mr. Rimington is in a terrible muddle, and all because he cannot realise that the ounce of gold, whatever its value, that is, whatever labour-time is necessary to its production, is still an ounce of gold, and exactly the weight of £3 17s. 10½d. in gold coin.

Surely I could not myself have found an illustration more shattering to Mr. Rimington’s view than that supplied by himself when he says: “Look at Germany during the inflation period ; prices equated to a printing press.” As a matter of fact, “prices equated” to the infinitesimal amount of gold behind the “printing press.” This in itself shows what becomes of prices when there is not a solid backing of gold behind its tokens.

I am sorry my critic is angry because I poked fun at his bloomer—though it was only six words. But doesn’t his mistake show that he doesn’t carefully read what he has written? And now I am accused of misquoting my opponent. Referring to myself, he writes, “He impudently says that I said that their exchange rate had nothing to do with what they would buy in their respective countries.” The statement Mr. Rimington says I attributed to him was my own statement, not his, and was clearly enough written for anyone to understand who has had the education my critic shows evidence of. But if he falsely says I misquoted him, I can show that he misquoted me, for he says that I try his patience when I ask “such a ridiculous question, ‘What, then, is the golden equivalent of a hundred loaves of bread when they have passed into consumption?'” My words were, “… what would become, will my critic tell us, of the golden equivalent of a hundred loaves of bread when the latter were consumed?” Quite a different question. These examples show that my critic not only is careless with regard to what he himself writes, but does not carefully read the replies of his opponents. To carry on a debate in such a manner is an abuse of the hospitality of these columns little short of disgusting. He need not fear that I wish to escape. If any of my statements are wrong, I know my duty to the Cause of Socialism too well to delay their retraction.

A. E. Jacomb

Letter: Money and price. (1927)

Letter to the Editors from the December 1927 issue of the Socialist Standard 

A Criticism and a Reply.

Sir,

I am of the opinion that A. E. Jacomb, writing under the heading of “Should we Produce More” (S.S., Oct. 1927) makes serious blunders in his economics. He says :

“Let us take the employed workmen in a community as one thousand, let us reduce their varied products to a common form, which we call ‘wares,’ and finally let us suppose that the price of each of those wares is £l, and it is the product of one man’s labour for a day. We have the following condition of affairs as the result of the day’s effort :—

Workers 1,000; Wares, 1,000; Price, £1,000. Now suppose that from some cause each worker doubles his day’s output, the figures then would be :—

Workers, 1,000; Wares, 2,000; Price £2,000.”


Now I have always understood since I became acquainted with Marxian political economy that
 price is the monetary expression of exchange value. That goods exchange for goods and that
 price was merely an indication of the relative value of each commodity to the amount of gold 
contained in the £1 sterling. Gold does not determine the price any more than a ruler determines the length of the object measured. Like other commodities, gold has value also price, and is subject to the same laws that apply to them. In fact one might as logically say that wheat determines the price of other goods. The reason why gold is adopted as a standard is its portability, the fact that it does not deteriorate in storage, and that on the average it is less subject to market fluctuations. The Labour Power necessary to produce a given quantity of gold is pretty constant from one year to another; Certainly the discovery of fresh deposits and the introduction of the cyanide process and modern crushing plant has reduced the value of gold which coupled with the fact that it no longer functions as coinage brings supply in excess of demand and a consequent fall in price. But to take A. E. Jacomb’s analogy we must accept the notion that inflation of the currency was responsible for the rise in prices during the war period and since.

I will now take Value and Price (Marx). Value is determined by the amount of socially necessary Labour Power embodied. Price equals Exchange Value, i.e., the relative amount of socially necessary labour power embodied plus the factor of supply and demand. Therefore it follows that if I have 2,000 wares the value of which, assuming that fixed capital is halved as well as variable capital in their production, is just that of 1,000 produced under the old conditions. Of a necessity they must ultimately saturate the market and price will fall below value and will actually exchange at an adverse price. Assuming that the process of production is extended to every other commodity the exchange, i.e., Price remains at par.

Foreign exchange will show how A. E. Jacomb falls. For instance, say, the £1 is quoted at 4.86 to the dollar, it has nothing to do with the amount of gold in either, but the amount of goods that each will buy in their own country. Gold is a mere detail compared to other values created. The amount held by the Banks only fractionally covers the paper in circulation, i.e., Treasury and Bank Notes. Commerce operates by Cheque, Bill or Draft—a mere book transaction. It could not be done by a transference of gold, without half of the population being engaged in gold extraction. Bullion transactions are but adjustments. In the short compass of a letter I cannot deal with every detail of A. E. Jacomb’s article, but may do so later, if allowed.—Yours fraternally,

F. L. Rimington.

Reply to Rimington.

I showed that the result of all wares, including gold, being produced at half the labour cost would be that prices remain the same. My critic says I am wrong. Yet he himself states : “Assuming that the process of production is extended to every other commodity, the exchange, i.e., price, remains at par.” Notwithstanding, then, that I am wrong and my critic right, we both say the same thing, and are in entire agreement so far.

However, Mr. Rimington did not know when to stop. He was safe enough while he was repeating the present scribe, but when he let go of his hand he was soon floundering in the mud. “Gold,” he says, “has value, also price,” and later tells us that gold supply is in excess of demand, and there is a “consequent fall in price.”

Gold has price, has it ! Then how is it expressed? “Price,” my friend correctly states, “is the monetary expression of value.” What, then, is the monetary expression of money? To say that the price of 1,000 bricks is £3 is an intelligent statement ; but to say that the price of the gold in £3 is £3 is idiocy. It adds nothing to our knowledge. An ounce of gold is coined into money expressed by the figures £3 17s. 10½d. It does not matter how the value of gold fluctuates, the amount of gold expressed by those figures is always the same—one ounce. If, then, £3 17s. 10½ d. is the price of one ounce of gold, how is the fall in price to which my critic refers expressed? If the figures are not the price, what is?

Price is an endeavour to equate one kind of commodity to a different commodity (gold), not one to its like; and since all prices are in terms of gold, gold is the only commodity which has no price, and can have none. If silver was the standard of price, then gold could have a price.

Mr. Rimington’s statement that commerce could not operate “by a transference of gold, without half of the population being engaged in gold extraction,” is another ridiculous assertion. The idea is, of course, that for every commodity which is not gold the golden equivalent must exist in order to enable it to exchange. If every piece of gold that was exchanged for a commodity dropped out of circulation when the commodity did he might be correct. But what would become, will my critic tell us, of the golden equivalent of a hundred loaves of bread when the latter were consumed? Would the gold be consumed also? Or would it be free to serve as the medium of further exchanges?

It is difficult to get to the back of Mr. Rimington’s mind, but he appears to imply that high general prices since the war are the result of the supply of gold being in excess of demand. Strangely enough, however, when prices were highest, gold was scarcest.

What Mr. Rimington has to tell us regarding foreign exchange is laughable. When “the £1 is quoted, say, at 4.86 to the $” (Gosh! nearly £5 to the dollar! what a come down for the British Lion !) it has nothing to do with the amount of goods each will buy in its own country. It simply means that the balance of payments is against the country whose money is at a premium. International debts (in commerce) are paid by a process of cancellation. The medium is Bills of Exchange. A in England owes B in America £100; C in America owes D in England £100. If A in England pays D in England £100 and C in America pays A in America £100, they are all square. B draws a bill on A for £100; this he sells to C, who, owing D £100, sends him the bill, and the latter presents it to A for payment upon the date of its maturity. All this is done actually through recognised agents, who buy and sell bills of exchange for a small commission. Now when payments due from England to America largely exceed those due from America to England there will not be sufficient bills on America offered to satisfy the requirements of all those requiring them to pay their debts to Americans. Clearly, then, gold will have to be sent to balance. As the cost of transporting gold has to be faced, the price of the bills advance to cover this. Should gold be very scarce in the country where the demand for bills exceeds the supply, then anticipation of difficulty in obtaining gold will send the price of bills up higher still. That, friend Rimington, is what “foreign exchange” amounts to.

Now let’s see where we stand. After the war prices were much higher than they are now. Also the rate of exchange as between England and America was much more unfavourable to England than it is now. According to Mr. Rimington this means that gold was in greater excess then than now; but according to what I have written above the reverse is indicated. Who is right? It is pretty clear that if gold had been so much in excess of demand in this country as to give us such high prices as prevailed after the war, the master class, instead of putting restrictions on its movement, would have been glad to send some of it to America, thus restoring the balance of exchange on the one hand, and lowering prices to their wage slaves on the other. The first would have meant that they could pay their debts more cheaply, and the second that they could have knocked down wages wholesale.

I have not space to deal with the other dud eggs in my critic’s mare’s nest, but if he is going to have another shot, he should try to be a little more careful.

A. E. Jacomb

Letter: What determines prices? (1927)

Letter to the Editors from the January 1927 issue of the Socialist Standard

Some questions and our reply.

To the Socialist Standard.

The answer to A.W.S. on Currency in December Socialist Standard interests me, as I too am perplexed about prices, and will ask for instruction.

As I understand Marx, prices are governed by value. Now as coal, bread, boots, etc., embody no more labour since than before the war, and are of no more value, why is it that prices have at times doubled? I have read Socialist Standard for June, ’22, but can’t gather from it a reply to my difficulty. I’m putting the question thus tersely, so to avoid complications. If I could get this clear, perhaps my other perplexities would dissolve.

Some phrases in your answer to A.W.S. seem to fog me: e.g., (3) “It depends,” “a huge inflation of the paper currency, the rise in prices, due to this movement.”

And in last few lines of the answer, e.g., “When a movement of currency affects prices.”

Does currency affect prices?

I shall be obliged for instruction.

A. S.

P.S.—Your reference to “Pleb’s” discussion, I did not find in December, ’21, or May ’22, Socialist Standard.

Answer to A. S.

The general question of the relation between prices and value is so well worked out by Marx in “Value, Price and Profit” that our correspondent is referred to that volume for a full answer.

Briefly it may be said that while prices are based on value they may deviate within quite wide limits above or below value in certain circumstances. The most usual of these are supply and demand. If demand increases relative to the supply, prices will tend to rise, even though value has not altered. On the other hand if the demand falls relative to the supply, prices will tend to fall, and may fall below value.

The special conditions at the opening of the Great War enabled capitalists to raise prices enormously. Since the War ended they have kept up prices in many instances by combinations, cartels, and trade agreements. It must be remembered that a general rise in prices means a rise in the cost of commodities required to maintain and reproduce labour power. This means that either the price of labour-power—that is, wages—must rise, or the workers’ standard of living must fall. Even with some rise in wages the standard of living may fall if the rise in wages is not equal to the rise in the cost of living at the old standard.

As we tried to show in the answer to A.W.S., when a currency is inflated as a result of the fall of credit (see example in June, 1922, Socialist Standard), the purchasing power of each piece of currency falls. If the labour time necessary to produce the commodities remains unaltered, the fall in the purchasing power of the currency is necessarily followed by a rise in prices. In other words, if a currency falls in value —or credit—while other things remain the same, prices will rise. If a currency rises in value—or credit—and other things remain the same, prices will fall. This is what was meant when referring to a movement of currency affecting prices.

By a slip of the pen the dates were given wrongly in the answer to A.W.S. They should have been as follows :—Socialist Standard for June, 1922, December, 1922, and May, 1923.

Ed. Com.

A Brief Exposition of Socialist Theory. (Continued.) (1921)

From the November 1921 issue of the Socialist Standard

Link to Part 7.

VALUE—continued.

The last article under the above heading appeared in the Socialist Standard of December, 1920. The long interruption in the series was due to circumstances out of the control of the writer.

In the article referred to, we commenced the discussion of the theory of value; the following is a summary of the conclusions arrived at :

  Economic wealth is the result of human energy applied to the materials provided by nature.

  The wealth of to-day appears as a multitude of useful articles for sale—commodities.

  A commodity is a useful article (not to the producer, but to the potential buyer) produced for sale.

  The uses of such an article are as many as the human wants it can satisfy ; but these uses have no connection with its value.

  The value of an article is something contained in it that is only expressed in exchange. Absolute value cannot be expressed, only relative value.

  The only common property of all commodities, apart from their physical properties, is their property of being the product of human energy.

   All commodities represent certain proportions of simple human energy.

   Human energy is measured by time.

  The value of a commodity is measured by its cost of reproduction in human labour time— the time simple human energy would occupy in reproducing it.

The conclusion that the value of an article is determined by the amount of socially necessary labour contained in it, gives us the key to the apparent mystery of commodities. At the bottom, commodities represent the relation of the labour of one man, or group of men, to that of another man, or group of men; this relation becomes mysterious, simply because it appears before our eyes as a relation between two articles. In other words, at the back of the expression of value lies the relation between different methods of expending human energy.

The next point we have to consider is the double-sided nature of the labour contained in commodities. On this point Marx wrote as follows :

"I was the first to point out and to examine critically this twofold nature of the labour contained in commodities. As this point is the pivot on which a clear comprehension of political economy turns, we must go more into detail."

We have seen that a commodity is a useful article and a value; and that the latter is determined bv the amount of labour-power required to reproduce such an article. But just as an article must be looked at from two points of view, so also must the labour contained in it. For example, the labour incorporated in a commodity appears on the one side as the work of a baker, a shoemaker, an engineer, and so forth. That is to say, labour of a particular kind or quality, labour that produces a particular kind of article. But on the other side it appears just as the simple expenditure of human energy—getting tired. All its particular physical characteristics are abstracted and it is viewed as the normal activity of the human organism.

If, therefore, taking for illustration the simple exchange of one article for another, we say : 

l pair of boots = 1 hat,

we are simply stating that the same general substance—human energy—exists in the same quantity on each side of this statement or equation.

On the one hand, therefore, we have concrete or useful labour; on the other hand, abstract or value-creating labour. We look at one from the point of view of quality— the kind of labour (baking, engineering, etc.), we look at the other from the point of view of quantity—the amount of labour; the unifying point is the fact that labour of different qualities is, at the bottom, the simple expenditure of human energy.

From the above it will be seen that labour expressed in value has different attributes from labour as a producer of use-value. This enables us to understand another point around which there is a considerable amount of confusion.

At a first glance it would appear that an increase in the quantity of articles produced would necessarily result in an increase in value—more articles, more value. If we examine the matter closely, in connection with what we have already learnt of the twofold nature of labour, we will see that the above statement is not correct.

Suppose a method of producing boots was discovered whereby two pairs of boots could now be produced with the expenditure of the same amount of energy as it formerly took to produce one pair; we would now have two pairs of boots instead of one (an increase in material wealth), but the same quantity of value is contained in the increased amount of wealth as was formerly contained in the smaller amount. This illustration shows the necessity of understanding the twofold nature of labour contained in commodities.

As different commodities are the products of different kinds of labour, commodity production—Capitalism—could not come into existence until the method of expending human labour power had reached the point where it was split up into a multitude of different kinds carried on independently of each other. To put the case another way : Before the exchange of products in the form of commodities can exist as a social basis, the labour of society must have become sectionalised in such a manner that human energy is expended in different ways, each way being carried on independently and for the account of private individuals; there must have arisen a social division of labour. This naturally follows when we remember that, in bringing two different commodities upon the market to exchange for each other, we are in reality exchanging two different kinds of labour. There would be no point in exchanging one hat for another of exactly the same description, i.e., the labour of a hatter for the labour of a hatter. From this fact it follows that while we can have the social division of labour (as in primitive societies) without commodity production, we cannot have commodity production without the social division of labour.

The value of a commodity represents the expenditure of human labour in general, but this simple labour is generally expended under the cloak of labour of different degrees of skill. Skilled labour in essence is more intensified simple labour—a given quantity of skilled labour is equal to a greater quantity of simple labour.

In the process of commodity production all kinds of labour—no matter what the degree of skill may be—are reduced to the simple expenditure of human energy. This reduction of skilled labour to simple labour is not done openly or consciously—as Marx puts it :

"The different proportions in which different sorts of labour are reduced to unskilled labour as their standard are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom."

A good illustration of the point with which we are dealing was provided in the Whistler versus Ruskin case some years ago.

In the course of the action, one of Whistler's pictures (the subject of the action, the "Nocturne in Black and Gold") came up for discussion. This picture had been exhibited at a gallery and marked two hundred guineas. After Whistler had informed the Attorney-General that, altogether, he had only been two days working upon it, the latter asked : "Oh, two days ! The labour of two days, then, is that for which you ask two hundred guineas !" To this Whistler replied: "No; I ask it for the knowledge of a lifetime."

The above puts the case in a nutshell. Highly skilled labour is the result of the expenditure of energy in the past to make it skilful—it is more intensified labour—a multiple of simple energy.

Gilmac.

(To be continued.)

Answers To Correspondents. (1908)

Letter to the Editors from the July 1908 issue of the Socialist Standard

  W. L. B. (Manchester).—1. Could you give me a. good definition of Capital ? 2. I suppose Marx, when he mentions labour, includes mental and physical. 3. Will wine increase in value without labour of any kind ? Many years ago an aerolite fell in Sweden. The curator of the museum bought it for £84. Did labour create the aerolite and give it value?

Reply:

1. Perhaps the best general definition of capital is "Wealth used for the object of obtaining a profit." In the narrowest technical sense, capital is money used to obtain more money; but Marx's own formula (in "Capital," p. 133) is as simple and direct as any student could wish. Our correspondent is referred thereto.

2. Alexander Bain has shown in his "Mind and Body" that it is impossible to separate mental from physical actions, and that the two are inseparably connected. And Marx himself had already recognised this fact in "Capital," (p. 11) where he says ''different productive activities are each a productive expenditure of human brains, nerves and muscles, and in this sense are human labour." But it should be noted that the apologists for capitalism usually state that Marx only dealt with manual labour, and left out of consideration the organising and directive activities required in production. This is a deliberate falsification of Marx's position. (See "Capital," pp. 311, 321, 322 (Vol. I.) 

3. No. For wine to reach a given stage in ripeness or maturity, it is necessary to store it under certain conditions in specially constructed buildings, vaults, etc. This often involves a heavy initial outlay, to which there is to be added the cost of maintenance and upkeep of these places, and the various plants (machinery, etc.) used therein. To replace all these means of production a certain sum is set aside yearly, depending upon the average time these things last under normal wear and tear. Obviously the longer the wine is stored, the larger is the total amount of labour expended upon the storage, and—in general—the higher will be the price of the wine. 

4. With reference to the aerolite, there is here a confusion of price and value. Price is the amount of money given for a thing, while value is the social labour-time embodied in the thing. On the average, and taken over sufficient periods of time, price is the monetary exponent of value, but in detail "the deviations of market prices from values are continual," while, strange though it may seem, things may have a price without having value. Marx says: "Objects that in themselves are no commodities, such as conscience, honour, etc., are capable of being offered for sale by their holders and of thus acquiring, through their price, the form of commodities. Hence an object may have a price without having value." ("Capital," p. 75). Labour did not create the aerolite, nor—except for the small amount of energy expended in bringing it to the curator—did it give the aerolite value. The price paid was entirely the subjective estimate of the curator for his museum purposes.