William Petty

Thomas Hobbes contributed some of the founding philosophical principals of political liberalism. William Petty (1623-87), a talented mathematician, was one of the first writers on economic questions to use mathematical analysis, and is credited with creating the first labor theory of value (in his Treatise on Taxes,1692). Together they were key founders of classical political economy (which is the basis of all the branches of modern bourgeois economics, from Keynesian to Neoliberal). Petty was the commoner son of a clothier, but advanced socially because of his brilliance as a student, which eventually led to a critical connection with a wealthy aristocrat (whose son he tutored), which eventuated in extensive European travel (with the son) and furthering his own education in Europe. Back in England, Petty eventually became personal secretary to Thomas Hobbes. The connection with Hobbes probably led to his appointment as physician with Cromwell’s occupying army in Ireland from 1652 to 1656. It was in Ireland that he earned fame and fortune, not as a physician, but as an economist. Here he employed his “political arithmetic,” to estimate the potential (exchange) value of expropriated Irish land.

Many Irish consider their country to be the first victim of English imperialism.  England’s commercial exploitation of Ireland dates from Henry VIII’s attempt to bring his Reformation and expropriations to Ireland, but only partly succeeding with the latter. Cromwell needed Irish land to distribute to veterans of his New Model Army in lieu of payment in cash, but, more generally, his plan was to turn Ireland into a profit-making plantation for liberal English gentlemen. Petty put his surveying and mathematical skills to work. For this he was rewarded with 30,000 expropriated acres and a noble title.  

What Petty learned in Ireland he applied in England for estimating the value of nation’s productive property, especially property in land. His labor theory of value was developed as a method for determining the rate of profit for productive assets, beginning with land, so that taxes could be assessed more scientifically. Returning to our simple representation of the fundamentals of capitalism: M--P--M’--Petty centered on “P” production, because capitalist plantation owners had taken control of the production process out of the hands of peasants and artisans in overturning the feudal order. In Petty’s formulation, “P” stands for the means of production: land, labor, tools, buildings, etc. --or in terms of “political arithmetic,” not the physical assets themselves but their exchange value: their cost to the  new, rational, mathematically minded capitalist who (himself or his agents) directs the production process for the purpose of profit-making.

Petty separated the means of production (P) into two economic categories: “labor stock,” and “asset stock”. “Labor stock” is key to Petty’s labor theory of value. It doesn’t represent an actual human being, but an abstract, monetary value: the capital cost for satisfying the basic needs of the workers one employs during a production cycle. For Petty, given 17 century economic conditions, “labor stock” could represent the cost to the employer of slaves producing goods on American plantations, wage earning peasants on English commercial farms, cottage artisans doing piece work for merchants, or uprooted artisans, paid by the piece, or paid wages in large manufacturing operations. “Asset stock” represent all means of production other than “labor stock,” and like labor stock does not represent the actual material assets--land, raw materials, tools, buildings, etc. It represents to cost to the projector/capitalist of those material assets. Simply put: in the formula, M--P--M’, “P” (the capital invested in the production process: M for labor costs + asset stock) should result in the production of products whose value when sold on the market should be M’: products that when sold bring in more money, or profit, than the cost of producing them. Petty was a practicing projector and made no bones of how profit was actually made: one bought labor to produce “excess products,” the value of which was more than the cost to keep labor working and producing more and more profit, day after day. 

 Another important category is Petty’s concept of “natural rent,” which reflects the  potential productivity of a parcel of land relative to the application of labor stock . Rent is a percentage of the value of the “excess” product (profit) that a capitalist/renter pays to his landlord. The better the quality of land, the more goods it can produce per worker, the higher the rent, and vice versa. Rent for a building follows a similar logic (percentage of the market value of the structure). The same political arithmetic for calculating costs and profit can be applied to the merchant capitalist who organizes skilled labor under one roof for piece-work in the production of cloth or wagons: profit represents the difference between the manufacturer’s costs for labor stock and asset stock (and perhaps rent for the building and interest on a loan to initiate the operation) and the monetary value of the product(s) he sells on the market. 

Petty’s value equation for a particular productive (profit-making enterprise) might look like this: V (or Exchange value of the commodity produced)=labor stock (cost of labor)+asset stock (cost of all other means of production, including rent and interest costs)+excess product* (profit). 

[*either relative to the cost of labor stock to make a single product or the excess products in a batch of goods]

 Petty estimated that England’s national income (gross domestic product in our terms) of his day amounted to about 667 million pounds, 417 million pounds of which was made up of labor stock and asset stock costs. That left 250 million pounds of taxable income for the state. 

What makes Petty’s “political arithmetic” a labor theory of value is that the labor which the capitalist buys as “labor stock” can be shown to produce all wealth: “asset stock” in the form of labor-prepared land and raw materials, buildings and  tools, etc., as well as the “excess product” which the capitalist transforms into profit by sale on the market. Labor stock in the person of the actual laborer can even be shown to produce and reproduce itself because some of the profit from the “excess product” (which the laborer produces) the capitalist invests as a cost (M) to sustain the actual human labor force he needs to produce more “excess product” (profit or M’). Even interest and rent can be shown to be merely that portion of the excess product that landlords and bankers appropriate from producing capitalists (who appropriate it from labor) by dint of their monopoly in land or money. 

Petty, however, was not Marx, but a gentleman theorist of his own time and class. He was far from friendly to labor as such. True, he concedes that human labor as such is the source of all wealth. That was a common, ideal (physiocratic) assumption of the time. But for the capitalist projector, the point of production is not to produce wealth (useful things), it’s to make money (profit) on one’s investment in “labor stock” and “asset stock”, free or slave. Aristotle, himself, limited by the slave-holding (“democratic”) conditions of this own day, viewed the slave as “while being human by nature is not his own but of someone else” ...a “talking tool.” Likewise, Petty viewed both slave and wage worker, not as their own, but as capital belonging to the capitalist (the latter only during the period of his employment). Workers as such, living, productive human beings existing outside the capital relation which renders him or her “labor stock” (given the ongoing ravages of primal accumulation) were worth little, or actually worth nothing. The conclusion is inevitable: capitalists, owners of labor stock, not human labor as such, are the creators of wealth. 

                                                        

John Locke

Petty’s transformation of the physical worker into a marginal utility (to use Keynes’ term) of an investor’s capital was utilized by John Locke, to make tyranny and injustice seem liberating and just, when he famously and disingenuously proclaimed that land belonged only to those who “worked the land”--this not in defense of the actual workers of his day who were being forcibly removed from their occupation of threatened common lands--but in defense of land-grabbing “projectors” like Petty and Locke himself, whose troops were uprooting them. Locke’s declaration is a casuistical nail driven into the coffin of vestigial feudal (land possession and village habitation) rights and a declaration of bourgeois independence from feudal right by capitalists who legally seized land that happened to be occupied by peasants who worked it for their own subsistence rather than profit. Such land (usually common lands or land held without proper title by small producers) was considered by the new mathematically minded elite “unproductive” (of profit) and therefore “desert”. In other words, the owners of capital, who employed their labor stock to make the land productive (of profit)--not those who who sustained themselves by their own labor, had the right to own it. Similar political arithmetic was (and still is) used to justify the “legal”, violent dispossession of native populations globally to make room for capital. 

Locke inspired Jefferson’s Declaration of Independence and is the ideological father of “Liberty”, the US Constitution, and parliamentary democracy. He was also the father of the Virginia Colony’s slave laws, which served to legitimate the chains that bound Thomas Jefferson’s African “labor stock,” giving owners not so humane as our third president the liberty to put such property to death if necessary in pursuit of profit. In the Leviathan, Thomas Hobbes defined “honor” “as  “power” based on wealth. In his “Second Treatise on Government (1689),” his former student, John Locke, put the same idea this way: “the great and chief end of men who come together to form a government....is the preservation of their property”. 

The 18th century was the age of satire in Europe--usually aimed at the dull-witted hypocrisy and rapaciousness of the rising bourgeoisie. Jonathan Swift might have had “projectors” like Locke or Petty in mind when he assumed the persona of an unctuous English gentleman-projector and humbly proposed, in A Modest Proposal (1729), a project whereby uprooted, starving Irish women might be encouraged to make labor stock of their unprofitable, brat-producing (desert) bodies and produce children as “excess product” (profit) for the refined tables and jolly hunts of thoughtful, well meaning liberal capitalists like himself. Today, the human rights face of the neoliberal empire is similarly modest in proposing market based solutions for lifting capitalism’s victims out of poverty: selling themselves and/or their children into the tourist industry; becoming indebted entrepreneurial street cooks and artisans; marketing valuable parts of their bodies; offering as commodities their ethnic provenance and language skills to occupiers or their outrage to saudiemiratesforempire@cia.org

Locke and Aristotle can and should be critiqued for representing their own class interests, but the critique and the critic exist because of the social and intellectual space, that earlier thinkers like them helped to clear of reactionary ideas and institutions that themselves had once served to bring human consciousness and institutions out of an even earlier darkness. The evolution of political/class consciousness is driven by human need to overcome the resistance of the beneficiaries of the hierarchal institutions (social and intellectual) we create and continue to create in our disunited struggles against extinction and freedom from necessity.