labor theory of value

                                  

                                   The Labor Theory of Value

                                                         

1. Definitions

Any attempt to explicate Marx’s labor theory of value, must begin with definitions of three key terms: wealth, value, money. The definition of these terms, like the definitions of all socially generated concepts, must be defined within their historical/material context. The same goes for the labor theory of value itself, which is the product of a dialectical critique of “political economy”.  Before moving on to Marx’s theory, “political economy” must also be defined in relation to the historical experience that encouraged its invention. In that regard I’ll present a brief discussion of the relevant ideas of the fathers of English political economy: Thomas Hobbes, John Locke, William Petty, Adam Smith, and David Ricardo. Then I’‘ll conclude with Marx’s labor theory of value. Human beings are more or less conscious, living histories of the human social experience.

                                                                                                                          

Abundance of good things like fruit and nuts does not make for a wealthy monkey. Wealth consists of the products of social labor which satisfy the basic and socially necessary needs of human beings. “Value” is a measure of wealth. There are two kinds: use value and exchange value. Use value is the measure of wealth as such: the degree by which particular products of human labor are useful in satisfying a particular individual and/or societal need. Exchange value is an abstract notion of equivalence assigned to products that are exchanged for one another. It arises only under conditions of exchange of such products. Prior to the establishment of societies dominated by the capitalist system of production, production of wealth was intended for use by the community of producers. Among pre-capitalist societies surplus products were sometimes exchanged. Then some notion of equivalence (probably relative to effort required in the production or transport of a product), would come into consideration.  But such trade--even under patriarchal hierarchies like feudal societies, where the lord garnished the surplus product of his villages for his own consumption and/or for trade with merchants--was conducted in goods which were primarily produced for use, not exchange. 

Once money relations began to penetrate pre-capitalist society in late medieval Europe, resulting in land privatizations and peasant/artisan loss of control of what was produced, increasing proportions of agricultural based goods were produced for their exchange value, as measured monetarily on the "market, rather than for use and local consumption. From the point of view of those, proto-industrial, profit-seeking landowning aristocrats, merchants, and bankers who organized uprooted peasants and artisans to produce goods in privatized village cottages of larger workshops in the towns, it was the exchange value of these goods, not their use value that mattered. All human beings can get along perfectly well in satisfying their needs with useful products, even capitalist human beings. But, as contrasted with pre-capitalist elites who valued the labor they exploited for the use values that they created, and which they consumed, capitalists as such, thrive and live on the exchange value of the products that the employees produce--that is to say, on their monetary equivalent and something extra--profit---when the products are sold on the market. The capitalist mode of production grows out of pre-existing market relations, but begins and ends with money. Money is invested in the means of production, including labor;-products are produced, and then sold for more than the original investment, profit. To put it another way, capitalists own the means of production, including workers during the working day, and if workers employing those means cannot produce enough products that when sold will cover the cost in labor and material for producing them--plus sufficient profit--capitalists will not begin production, or they will stop producing if once begun. A marxist cultural philosopher once pointed out that unemployment is the essential product of the capitalism mode of production.  

Money as a measure of exchange value existed before capitalism and was necessary for its development. As human society evolved and trade expanded, certain especially desirable commodities were hoarded by early professional traders because they could be exchanged in certain portions for any other commodity in a particular region.  From ancient times, “commodity money” (salt, gold, beads, silver, etc.) in a given region was employed as a standard for measuring equivalency between goods being traded. For example in a given trading area, according to the relative need and scarcity of a range of products, a pound of salt might exchange for one shirt, or 1/10th of a good knife (requiring 10 pounds of salt), or four pounds of potatoes, etc.). Commodity money--the basis of all monetary forms--is simply a product of human labor that comes to be socially recognized in a trading region as possessing certain characteristics that rendered them exchangeable for all goods produced in a given trading region: it had to be desirable everywhere, so that a seller would accept it in exchange for his or her particular product because it could be exchanged for other useful goods that he or she might need; it had to be scarce (relatively hard to come by); it had to be frangible (capable of fragmentation without loss of its essential, desirable characteristics).  

With the coming into being of patriarchal hierarchies, governing powers tended to monopolize the process of breaking up commodity money (minting) into denominations relative to weight. Minting of frangible commodity money made it easily portable and speeded up the processes and spread of trade. In Western Europe, gold and silver became the main form of money by classical Greek and Roman times (600 B.C. to 200 B.C.).The English pound was actually a pound of sterling silver which could be broken up (according to weight) into pence, quid, etc. Huge amounts of gold and silver from the newly discovered Americas in the 15th century made this universally desirable form of commodity money relatively cheap, tremendously accelerating trade in Western Europe and around the world, giving European merchants a  comparative monetary advantage in global trade for empire building during the 16th and 17th centuries. 

The fundamentals of the two historical forms of capitalism (merchant and /finance/industrial) may both be represented diagrammatically as: M--P--M’. Or (M)oney is invested in a finished (P)roduct (merchant capital) or in the production of products (industrial capital) in order to make (M’)ore money than what was originally invested, or profit. In other words, the focus of capitalists as such is not on the use value of their products, but on money: the amount invested in producing goods and the larger amount of money returned to the capitalist after the product is sold on the market. Money (paper, financial instruments, or some form of the commodity money) is the measure and store of the exchange value of capitalism's "commodities":  goods that are produced not for use but primarily for exchange on the market. Therefore the final buyer of a commodity must (1) need or desire the commodity as a use value and more importantly (2) have money equivalent to the commodity's exchange value: equaling the money invested, plus something extra, or profit. Capitalists are driven by the profit motive to produce products for exchange on the market for the monetary, which they accumulate as money capital for re-investment and growth. Money is everything. Yet for the system to operate effectively, it has to produce use values…for consumers who need them and have the money ("effective demand") to buy them. In mature capitalism those effectively demanding consumers of use value are mostly wage earners, whose earnings must be kept low enough for the capitalist enterprise to remain profitable. And there's the rub. 

A brief history of liberal political economy

 Thomas Hobbes

During the 16th century, merchants and bankers had succeeded in breaking through feudal barriers, commercializing much of the land (for plantation agriculture, commercial logging, and mining) and breaking the hold of city guilds in the manufacture of goods, all the while establishing themselves as creditor/treasurers of the Tudor court and partnering with well placed courtiers like Sir Francis Drake, Sir Walter Raleigh in merchant adventurer colonial/piratical enterprises. This symbiotic relationship between merchant/bankers and the Tudor state became problematic after the death of Elizabeth 1 in 1603.

 During the first half of the 17th century, England was embroiled in a struggle for control of the state between the weakened landed aristocracy and the ascendant merchant/merchant banker class. The bourgeois class had outgrown the cosy, semi-feudal arrangement under the Tudors. They had grown richer than kings and courtiers, but lacked real control of the state. The rule of the Scottish King James VI, as James 1 of England (1603-1625), inaugurated a period of intrigues and murderous plots within the court cabal--actual Jacobean dramas which Shakespeare and other dramatists imaginatively transported to distant times and places. James 1 died in 1625. He was succeeded by his son, Charles 1, whose troubled rule eventuated in a civil war and his execution in 1649 by the victorious forces of the Parliamentary party that represented the interests of landowning, commercially oriented aristocrats of the robe and of more ancient lineage, wealthy merchants and bankers, proprietors of large merchant/banker-organized “factories”, ship owners and their warehousing “factors”, absentee owners of colonial plantations, and well connected professionals serving the interests of all the above--all frustrated by the vestigial feudal privileges of conservative great lords and their dependents: merchant/bankers connected to such lords, entrenched gentlemen-courtiers who took advantage of their privileged access to powerful positions in the state bureaucracy to enrich themselves (bribes, taxes), at the expense of the enterprising bourgeoisie. 

England’s civil wars (its “Bloody Revolution,1642-51),” were the culmination of a process of transforming feudal right to land and governance to bourgeois right to land and governance. The question of legitimacy regarding the right to occupy and use land was critical because land was the basic source for the production of wealth before the advent of industrial capitalism. Feudally, land was not “owned” by the occupying noble but was held in fealty to a superior lord in a corporate hierarchy crowned by a king, whose own right to his realm was sanctioned by God. On the other hand, bourgeois property right was developed by non-land owning (except in the large, chartered towns) merchant capitalists trading goods. Ownership of such goods and other personal property was vested in the individual by contract involving the exchange of money. Economically, this process of making a commodity of the land had been evolving situationally (but with legal ambiguity) for centuries before the civil wars broke out.  

For example, it was common that the bourgeois gentlemen, rather than swearing fealty to the noble lord, bought his land under some sort of agreement that stipulated a yearly fealty fee, which served to legitimize his occupation and use of the land, but also served to remind the new “owner” of the precariousness of his possession. Similarly, there remained the customary right of nobles to high office in the state. The killing of the king and the taking over of the state by the Parliament party pretty much took care of that customary right. But there remained the critical need to create laws justifying and protecting bourgeois property rights, and an even greater need to theorize and legitimize the revolutionary state, which, in killing the King, had, in effect, deprived itself of the sanctioning power of God. The new science of political economy came to the rescue.

 During the 17th century, a scientific revolution was taking place in Europe, challenging the power of religious dogma to sanction truth with the sanctioning power of scientific “truths” drawn from the study of “Nature”. Thomas Hobbes (1588-1679), historian, physicist, political theorist, one-time student of Sir Francis Bacon (and his method of reasoning inductively from observed experience) returned to England from France when the issue of the civil wars was settled, and served as secretary to the Lord Protector, Oliver Cromwell. In his Leviathan (1651), Hobbes based the sanctioning (“honor”) of the state, not on divine sanction, but on its power to create and maintain order. For Hobbes, power is its own justification and deserves men’s “honor” (submission). Hobbes based this stance on his definition of Human nature, which he postulated as fundamentally selfish, competitive, acquisitive, and violent. Under natural conditions of equality, he reasoned, mankind lives in a state of “war of all against all.” Life is “solitary, nasty, brutish, and short”. For Hobbes, given his assumptions regarding the barbarism of natural man, any kind of state was better than egalitarian anarchy. Hobbes' reputation as a key founder of political liberalism derives from his theory of the social contract. Here sensible men agree to relinquish some of their liberties to the sovereign power of the state, which secures their lives and their property.  Hobbes doesn’t fill in the gap between natural man and the sensible ones among them who come to own property and make social contracts.

The contradiction between Hobbes’ scientific, empirical approach to physical phenomena and his representation of social phenomena in non-empriical, archetypal form (i.e. the representation of mankind in a state of natural equality, and the gentlemen who form the social contract) is problematical. An empirical approach to either would require some sort of historical contextualization. In terms of the historically created social contract with which he was familiar, the contractors--wealthy merchants and landowners who had the good sense to come together to form the new state--were only a tiny minority of those swept up in the civil wars (“war of all against all”). Cromwell’s New Model Army in itself included small farmers, artisans, and peasants, many of them "levelers" and Christian communists like Winstanley’s Diggers, who practiced equality between the sexes in communities set up commons they re-occupied. Latent hopes (reaching back to the peasant/artisan uprisings of the 14th century) among the common people for a better humanity had been reawakened in those unsettled times. Without these troops (and their hopes) there would have been no social contract which created the new elite to which Hobbes belonged--one which, as things turned out, liberated the peasant from feudal oppression...as well as from his vestigial feudal rights to the commons--while giving the venal, bourgeois landlords newly enshrined legal sanction to enclose common lands and forcibly, selfishly, acquisitively, remove those who believed that they they still had the right to occupy them. 

Many of those who came together to form the social contract must have actually resembled Hobbes’ primitive man, but dressed up sensibly, as economic man, their vices became virtues. Readers often misunderstand Hobbes. Man’s primitive brutishness is not the problem. But there is a problem when it is expressed under conditions of equality. 

As for Hobbes’ archetypal character structure of “mankind”--not to make invidious comparisons--it seems to exclude the female of the species. Hobbesian “man” is obviously and emphatically male, manifesting alienating characteristics, that while destructive of culture and enterprise, can be viewed positively. After all, competitiveness, acquisitiveness, and aggression ares valued traits in patriarchy’s pantheon, whether found in Achilles, Cromwell, or God Himself. In Hobbes, this archetypal structure of mankind is postulated dispassionately as “natural”. This view, however, is natural only to advocates of the liberal state and free market economics. For Hobbes, women as such could not be taken seriously in serious matters. Yet he feared them. For instance, Hobbes probably did not believe in witchcraft--but during a period of rabid persecution of women as witches throughout Europe, he publicly advocated the persecution and barbaric punishment of outspoken women as “witches”. Hobbes’s rational irrationality is characteristic of those defending hierarchy, whether based on the power of God or on reason and “natural” principles (i.e. male superiority, hierarchy based on ownership of property and money). 

Hobbesian “man” is simply a bourgeois version of the patriarchy’s ideal warrior, but in a business suit (silk hose and a wig in those days) when not in uniform--a hero, who, abstracted from the socializing influence of the female principle, must face alone--but for his possessions and the patriarchal god/state--the aggressions of his fellow, sexually and socially hollowed-out male competitors. Nationalism is the religion of the Hobbesian state, and a violent, but cowardly patriotism is the last refuge of such heroes: Oliver North, gun and dope runner, covert organizer of village massacres, plaintively intimating to everybody within ear shot that the “Old Man” (Ronald Reagan) “loves my ass” ; Henry Kissinger‘s basso profundo intimating in the glare of the media that political power (in his case, planning political assassinations and mass murder) is an “aphrodisiac”.

Kissinger won the Noble Peace Prize, as did our first Black president, Barak O’Bomber, who, teary-eyed, revealed, upon leaving office, that he believed in American exceptionalism  ...to the very [hollowed out] core of [his] being....