WeeklyWorker

15.03.2012
Labour-power plus nature equals wealth

The centrality of labour-power

Moshé Machover begins his examination of the labour theory of value by looking at the preliminaries

This is an edited version of the first half of a talk given on January 21 at a weekend school on the ‘Fundamentals of political economy’ sponsored by the CPGB. I am indebted to the CPGB for inviting me, and to comrade Michael Coulter, whose transcription of a recording of my talk forms the basis of this text. The second part of this article, containing the second half of the talk, will be published in the next issue of the Weekly Worker.

My opening talk, on the labour theory of value (LTV), was the most abstract in the two-day school, and quite rightly so: you start with the abstract and then move to more concrete questions. I had asked CPGB national organiser Mark Fischer whether I should pitch it at an elementary, intermediate or advanced level and he said “intermediate”; which I think is appropriate. I assumed that everyone knew the basics of Marx’s LTV, so my intention was just to give an outline.

In this first part I am going to make some general introductory remarks. Then, in the second part, I will concentrate on the problems of the LTV, the difficulties. I will mention several difficulties, but I will concentrate in more detail on one - a very old difficulty: the so-called ‘transformation problem’ and the solution Emmanuel Farjoun and I proposed in 1983.[1] At the time it had very little impact, but more recently it has become the starting point for a whole field of research. There was even an international conference based on the ideas in our book, organised in 2008 by Julian Wells, a Marxist economist at Kingston University.[2]

So I would like to explain, at least in outline, our very radical solution. ‘Radical’ in the sense that we would like to reject some of what Marx says in his attempt to resolve the transformation problem, but we nevertheless want to preserve the core of Marx’s LTV and rescue it from this difficulty that has bothered people for a long time. Because the LTV is absolutely central, not only to Marxist theory, but also to the very notion of political economy; as it is the key to demystifying what is in appearance very deceptive: the capitalist system. We live in it, so we do not usually notice how mystifying it is; but sometimes, things happen that are quite puzzling in the way ‘the economy’ works.

Metabolism of human labour

The basic observation - Marx may not have been the first to discover it, but was the first to put it clearly - is that political economy is about the social metabolism of human labour. I say ‘metabolism’ because it is comparable to biological metabolism. In his Critique of the Gotha programme Marx corrects the assertion that all wealth comes from labour; he says, no, all wealth comes from nature and labour. But labour is metabolised in production and through this process - simple or complex, depending on the society - the product of human labour is finally consumed.

Let me spell it out. The inputs required for producing any product are of three kinds: raw ‘gifts’ of nature, directly performed labour, and previously produced means of production. But this third kind of input (which in the capitalist mode of production assumes the form of constant capital) was itself produced earlier using three kinds of input: gifts of nature, labour, and means of production produced still earlier … and so on. If we push this analysis back further and further, the third kind of input dissolves and resolves itself into the other two. And we are left with two ultimate inputs: gifts of nature and human labour.

In all forms of human society, from the very beginning of Homo sapiens, this process was a social one. Humans never produced mainly for their personal, individual consumption and they never did it in isolation. The Robinson Crusoe myth is exactly that: a myth, a nice story (and even Robinson Crusoe needs a companion/slave to live more comfortably …). So political economy should be about the study of this metabolism; and, specifically in capitalism, the complexity of this process.

Originally in human society the metabolism is very transparent. I am not an anthropologist, but all the evidence I have seen provides a very sound basis for assuming that from the beginning of our species as hunter-gatherers there was a division of labour. First, a sexual division, whereby women did the basic food gathering, which produced the staple of consumption; and men did the hunting, which added the very useful optional extra of meat. And this requires some form of exchange. It is done by custom and is a natural process - there is nothing mysterious about it; you put everything in a pool and share it out.

There is another original, very ancient way of sharing the products of human labour: gifts. In fact, in some surviving societies trade is still glossed as though it were an exchange of gifts. Present-giving is very deep in human nature; we enjoy giving and receiving presents. There is every reason to assume that it has always been like this: since the very beginning of Homo sapiens, present-giving is basic.

Commodity production

Where it is a matter of presents, it is very transparent - whether it is an exchange where one expects to get a present in return, or where it is one-sided and it is fully understood that the receivers are not expected to return presents because they are sick or it is their birthday, or whatever. But then, as class society arises, it seems to get very complicated.

First of all, there is commodity exchange. Instead of sharing immediately with one another, people produce for selling, and they buy things. This is a rather opaque process because a person produces something - say, a shoemaker produces shoes - without necessarily knowing who, if anyone, will wear them. Whether the shoes are actually of any use depends on whether they can be sold. This whole process - an indirect way of cooperating, mediated by objects - is quite mysterious and is discussed in the early chapters of the first volume of Marx’s Capital on ‘commodity fetishism’. It is an opaque process that is difficult to unravel. But various thinkers have thought about it and have proposed a labour theory of value. Marx was not the first to propose such a theory; it is quite old.

By the way, when I say ‘value’ I mean what Marx calls ‘exchange-value’. Marx discusses two kinds of value: use-value and exchange-value. Use-value is simply the usefulness, the functionality of this or that good (or service), and it does not have to be a commodity in order to have use- value. A commodity will not be sold if it does not have any use-value, if it has no use; but not all things of use are produced as commodities. Use-value is primarily a qualitative attribute, whereas exchange-value is a quantitative measure that is common to commodities of all types. While the use-values of different commodities are all different, exchange-value is a common denominator that all commodities appear to have.

What is this common denominator? How is it quantified? As I shall show, the LTV was proposed by mediaeval thinkers; some people have even attributed the LTV to Aristotle, although I think this is very doubtful. But certainly Aristotelian philosophers in the middle ages, both Christian and Muslim, proposed versions of the LTV in both civilisations.

Forms of surplus extraction

Then there is another relation that intrudes: the exploitation of labour. Rather than an exchange of gifts or trade on equal terms, there is a surplus that is produced and is not given as presents, but is extracted from the direct producer by one means or another. Extraction of the surplus product has several different forms and socio-economic formations are classified according to which of these modes of extracting the surplus product is dominant (not which form exists: because the various forms have coexisted in many different societies). Let me enumerate the main modes of the extraction of surplus product.

Slavery. X works for Y who owns X. Human beings have become objects, commodities, sold and bought. This form existed in many societies, from very ancient times right down to the present, but was the dominant form of surplus extraction in classical antiquity,[3] as well as in the much later plantation economies of the West Indies and America.

Serfdom. This was of course dominant in mediaeval Europe, and lasted in some countries, notably Russia, well into the 19th century. There is also a form of serfdom that was very widespread outside Europe: state serfdom. The peasants here are serfs not of individual landowners, but of the state. This form of the extraction of surplus predominated in ancient Egypt.

The story of Joseph in the book of Genesis (beginning in chapter 37) contains a mythical explanation of how this strange mode of production came about. It is a very fascinating novella, a thriller; it has sex, sibling jealousy, love, deception - you name it. Joseph, a Hebrew teenager pampered by his dad, is sold into slavery by his jealous brothers, but rises by a combination of luck and inspiration to become viceroy of Egypt. By dint of his talents for divination and statecraft, he has the foresight to arrange for the state to buy up all surplus grain during seven years of plenty, and then during the ensuing seven-year famine he gets all the peasants to sell their animals, their land and their own bodies to the state in exchange for grain. And since then the land in Egypt belongs to Pharaoh, the ‘Big House’,[4] and the peasants have to give him one-fifth of the harvest. Only the priests are exempt, because the temples had grain allocated to them by the state, so they did not have to sell their lands.[5] This was actually the form of society in Egypt when this story was composed. It must have looked exotic to the author, who lived in a different kind of society, so it required some explanation, which is supplied by the fictional story.

Under state serfdom, most of the surplus is extracted as tax. If the state bureaucracy is not sufficiently strong and efficient for this task, it is done by tax farmers - local notables who collect the tax on behalf of the state, and keep some of it for themselves. Where this class is very strong in relation to the central state, it becomes something like a feudal class.

Another form of surplus extraction is debt bondage. There is a moneylender who lends the producer money - typically for buying seeds - but who charges very high interest; the direct producer gets deeper and deeper into debt and the lender gets the surplus through usury.

Wage-labour

Then finally there is hired wage-labour. This form predominates in our modern capitalist economy, but it is by no means new. There is clear evidence of it being very ancient. About 3,800 years ago the king of Babylon, Hammurabi, promulgated the famous Laws of Hammurabi, the first legal codex that we know about, and in it he specified the wages of workers of various skills (sailor, tailor, rope-maker, mason, field labourer, ox-driver, herdsman …) hired for a whole year or for a day.

For example, article 273 says: “If anyone hire a day labourer, he shall pay him from the new year until the fifth month [April to August, when days are long and the work hard] six gerahs in money per day; from the sixth month to the end of the year he shall give him five gerahs per day.”[6]

The Old Testament, many of whose civil laws are based on the Hammurabi codex, does not specify how much hired workers must be paid; but it warns the employer that it is sin to delay payment. A hired worker (sakhir) - whether he be “of thy brethren” or a foreign worker - must not be cheated; his wage must be paid before sunset.[7] So wage-labour existed; but it was not the dominant form.

When it comes to the capitalist system, it is characterised by two things. The first is generalised commodity production: almost everything is produced for sale rather than for immediate consumption. This includes labour itself, which is - or appears to be - a commodity. And so, in addition to the opaque relation of commodity production, the dominant way of extracting surplus is through the command of hired labour. Compared to all other ways of extracting surplus this is the most opaque, the least transparent and the most mystifying. For example, when it is a slave who is exploited it is clear what is going on: it does not take any analysis to see that the slave works, and the owner appropriates the produce and keeps the surplus left after what the slave is allowed to consume. Similarly in other forms - in serfdom, in debt bondage, in taxation - it is clear that the surplus is actually extracted by coercion. But in capitalism there is usually no overt coercion and everything is done on the basis of apparent freedom and equality. This makes things very misleading. Exploitation is disguised. So the media can tell us that it is the capitalists who are doing their workers a great favour: the former ‘create jobs’ for the latter and enable them to make a living. In this upside-down world it is the capitalists who are the ‘creators of wealth’, and some of the wealth they ‘create’ trickles down to the lucky workers.

Older versions of the LTV

Here is where Marx’s contribution to the labour theory of value becomes very important in unravelling what is going on. I said before that versions of the LTV had been proposed by mediaeval thinkers. Thomas Aquinas says in his Summa Theologiae (circa 1270) that “value can, does and should be increased in relation to the amount of labour which has been expended in the improvement of commodities”. In the Muslim world, the great Arab thinker, arguably the world’s first sociologist, Ibn Khaldun, wrote in the 14th century in his monumental work, the Muqaddimah, that:

... the wealth a person earns and acquires, if resulting from a craft, is the value realised from his labour … If the profit results from something other than a craft, the value of the resulting profit and acquired [wealth] must [also] include the value of the labour by which it was obtained. Without labour, it would not have been acquired.[8]

Fast forward to Adam Smith and we are in the early stages of industrial capitalism.[9] Then it begins to become tricky. The idea of these early labour theories of value - that the price according to which commodities exchange is determined by the amount of labour they have taken to produce - encounters a conceptual difficulty. Whether it was ever like this, under simple commodity exchange, in pre-capitalist commodity exchange, that price was proportional to value, I am not sure. Certainly there must have been a strong correlation between the amount of labour needed to produce something and the price it would fetch in market exchange. Otherwise people would not have come up with this idea. They must have observed that, in general, there is a strong correlation. How strong that correlation was is a serious question for economic historians.

The conceptual difficulty is this: if the value of a commodity is equal (or proportional) to the amount of labour needed to produce it, what about the value of labour itself, which is apparently also a commodity like any other? The price of a commodity must in general be greater than the price (that is, wage) paid for the labour that was required to produce it - otherwise there could be no profit. But if price is supposed to be proportional to value, then we get a contradiction: the value of a commodity must be greater than the amount of labour embodied in it. Adam Smith gets entangled in this; in his Wealth of nations (1776) he makes contradictory statements about it. David Ricardo is much clearer. In his Principles of political economy and taxation (1817) he states: “The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labour which is necessary for its production, and not as the greater or lesser compensation which is paid for that labour.”

Labour-power

Then here comes Marx with a very crucial conceptual and terminological distinction, which is really the key to Marx’s LTV: the distinction between labour and labour-power.[10] The commodity that the capitalist buys or hires is not labour, but labour-power, the capacity to do work. Labour is what the worker contributes in the process of production, where the capitalist consumes the commodity, labour-power, that has been bought. This is a crucial distinction, which was originated by Marx and is really a key to the whole thing.

In addition, of course, there are other qualifications. An obvious one is that the value of a commodity is the total amount of labour embedded in it and needed to (re)produce it; you have to count not only the labour directly done in producing it, but also the labour embodied in all the other inputs that go into the commodity - the raw materials, etc; all the inputs that have been used up also embody labour, which is indirectly added and must be included with the direct labour in order to make up the total value of the commodity.

Then there is the crucial proviso stressed by Marx, that the labour has to be socially necessary, which means two things. First, that if a worker works on producing a commodity much more slowly than the norm, this does not mean that the commodity is worth more; it has to be the socially normal amount of labour. Second, and very crucially, if a commodity does not get sold, then the labour has not turned out to be socially necessary. This unsold commodity has no exchange-value; it is wasted. The labour must be socially necessary in both these senses. Of course, in the latter sense you can only tell after the event: it depends on the commodity actually getting sold.

Now, each unit of labour-power has value, just like other commodities: the total amount of labour needed to (re)produce it. But the whole point is that the amount of labour performed by this unit of labour-power, and hence the value contributed by it to the product, is in general greater than the value of that unit of labour-power itself. In other words: the productive use of labour-power yields a surplus, a surplus value appropriated by capital as profit. So, according to Marx, the exploitation of wage-labour does not consist in capital deceitfully ‘undervaluing’ labour-power, but in the fact that the value created by labour-power and appropriated by capital is greater than the value of that labour-power as a commodity.

This is where we get to in the first volume of Capital: to clarifying this notion of the exchange-value of the commodity. This theory, the LTV as Marx leaves it, has certain difficulties, certain problems arising in connection with it. I will deal with these in the second article. There are two kinds. First, problems concerning how to measure the quantity of value itself. Some of them are, in my opinion, relatively slight difficulties that can be fairly easily resolved (one of them in at least two different ways). The second kind of difficulty relates to the exact connection between the value and the price that you pay: this is the most serious difficulty.

Notes

1. F Farjoun and M Machover Laws of chaos: a probabilistic approach to political economy London 1983. See also Farjoun and Machover, ‘Probability, economics and the labour theory of value’ New Left Review No152, pp95-108, 1985.

2. See http://sites.google.com/site/iwright/probabilisticpoliticaleconomy; also: http://en.wikipedia.org/wiki/Econophysics.

3. GEM de Ste Croix The class struggle in the ancient Greek world New York 1981.

4. Literally, ‘Pharaoh’ means ‘big house’ - just as we often refer to the US president by the metonym, ‘White House’.

5. Genesis 47:13-26.

6. LW King(translator) The laws of Hammurabi: http://eawc.evansville.edu/anthology/hammurabi.htm. The Babylonian year started in the spring month, just like the English financial year. A gerah was one-20th of a shekel.

7. Deuteronomy 24:14-15.

8. Ibn Khaldun The Muqaddimah: an introduction to history, translated by Franz Rosenthal, Princeton 1967, Vol 2, chapter 5, section 1.

9. ‘Capitalism’ is a term that we use; but, as far as I know, Marx never used it. He speaks of ‘capitalist relations of production’, the ‘capitalist mode of production’, etc, but never uses the noun ‘capitalism’.

10. By the way, by ‘labour’ here I mean what Marx calls ‘abstract labour’, as opposed to concrete labour, which is the creator of use-value.